legislative history of the statute, which evinced both a desire to have confidential tax returns and return information, but also to permit necessary Governmental access to tax data. To preclude a Governmental body from having full access to tax data which has already been made public would not appear consistent with the legislative history of the statutory provisions. E. AVAILABILITY OF THE REVOCATION LETTER AS RELATIVE TO EXEMPT STATUS Your inquiry also has raised the question of the availability to the Subcommittee of the letter written by the Chicago District Director of the Internal Revenue Service revoking the exempt status of the Fund. The authority for such disclosure is stated to be section 6104 (a) (1) (B) (iv). This section provides that: (B) Pension, etc., plans.-The following shall be open to public inspection at such times and in such places as the Secretary may prescribe: * * ** * * (iv) any letter or other document issued by the Internal Revenue Service and dealing with the qualification referred to in clause (i) or the exemption from tax referred to in clause (ii). Int. Rev. Code, section 6104 (a) (1) (B) (iv). The qualification referred to in clause (i) (above) is the tax-qualification of a pension, profit-sharing, or stock bonus plan under sections 401(a), 403 (a), or 405 (a) of the Code, or certain individual retirement plans. The exemption from tax referred to in clause (ii) (above) is the exemption of such plan trusts from tax under section 501 (a) of the Code. The plain language of such provisions would appear to cover the revocation of the exempt status and qualification of any pension or profitsharing plan, such as that done of the Fund in question. There are, however, at least three questions which should be raised about the application of section 6104(a) (1) (B) (iv) to the revocation letter sought by the Subcommittee. First, does the interaction of sections 6103 and 6104 preclude such access? Second, does the phrase "at such times and in such places as the Secretary may prescribe" permit the Secretary of the Treasury to deny the Subcommittee access to the information? Third, is this provision effective for revocations of exempt statutes acquired prior to the amendment of section 6104 in 1974? The interaction of sections 6103 and 6104 should not preclude the Subcommittee from receiving the revocation letter under section 6104(a) (1) (B) (iv). This is based on an application of two major rules of statutory construction. First, it is conceded that the revised section 6103 (f) (1) and 6103 (a) were enacted in 1976, two years after section 6104(a)(1) (B) was enacted as part of ERISA. Normally, of course, contradictory provisions are interpreted in favor of the latter of the two. However, there is also the guiding principle of statutory interpretation that, wherever possible, statutory provisions are interpreted consistently, rather than as a conflict. Sands, Sutherland on Statutory Construction, vo. 2A, sec. 53.01 (1972, supp. 1976); and 82 C.J.S. Statutes, sec. 368 (1953, supp. 1976). Consequently, the more reasonable and consistent interpretation would seem to be that even if section 6103 (a) includes the revocation letter as either a return or return information, section 6104(a)(1)(B)(iv) would constitute an exception to such confidentiality. The phrase "at such times and in such places as the Secretary may prescribe" should be interpreted in light of the general legislative history of the provision. Section 6104(a)(1) (B) was intended to provide plan participants with information as to the tax-validity of their pension plan, and was to provide maximum publicity of pension plan materials, except for those items revealing the personal finances of the participants. Consequently, the more proper interpretation would seem to be that the discretion vested in the Secretary is only to be such as to preclude unreasonable requests for data. It might authorize the Secretary to set up a national location for such data, rather than have every District Director maintain a copy of all plans in all offices. It might also require the information to be inspected in the central location, or to be copied at the taxpayer's expense. However, it would seem to be a conflict with the basic purpose of the statute for the Secretary to be also to preclude a Subcommittee of Congress or any other body or person from examining the revocation letter. S. Rep. No. 383, 93d Cong., 2d sess. (1974); H. R. Rep. No. 807, 93d Cong., 2d sess. (1974). The third argument is raised by the representatives of the IRS, who claim that the term “dealing with the qualification referred to in clause (i)" does not include revocations of the qualification. The IRS representatives note that the revocations are frequently on and off processes, and that when the determination letter were actually revoked that would be noted by removal of the letter from public files. This interpretation would appear to be a reasonable one, but not the only reasonable interpretation. It would appear to be a sound, probable and presentable argument that the revocation of an exempt status or qualification is as significant to the beneficiaries of the plan as any other document about the qualification. The legislative history was relatively clear that maximum disclosure of these qualification matters were to be made in order to inform the beneficiaries. The IRS position would, therefore, appear to be a narrow construction of the statutory provisions. HOWARD ZARITSKY, Legislative Attorney. COMMITTEE ON WAYS AND MEANS, Hon. JEROME KURTZ, Commissioner, Internal Revenue Service, DEAR COMMISSIONER KURTZ: On March 15, 1977, while testifying before the Subcommittee on Oversight of the House Committee on Ways and Means, Charles L. Saunders, Jr., Acting Chief Counsel for the Internal Revenue Service, informed the Subcommittee that the Internal Revenue Service does not believe that Section 6104(a) (1) (B) (iv) of the Internal Revenue Code of 1954 authorizes the Service to permit public inspection of its revocation of the earlier favorable determination letter as to the tax qualification of the Central States, Southeast and Southwest Areas, Teamsters pension plan. Mr. Saunder's testimony indicated that the provision of Section 6104(a) (1) (B) (iv) of the Code (see attachment) requiring public inspection of a "letter or document issued by the Internal Revenue Service and dealing with the qualification referred to in clause (i) . . . does not, in the belief of the Service, extend to revocations of those favorable determination letters. ... Mr. Saunders' testimony suggested that the position of the Service on this question is rooted, at least in part, on the belief that "clause (iv)" was added by the Employee Retirement Income Security Act of 1974 (ERISA) for the benefit of the plan participants and beneficiaries, and that knowledge of a plan's qualification is not especially significant in safeguarding the rights of those participants and beneficiaries. It is my undertsanding that the primary purpose of "clause (iv)" was to insure that the public can learn how the law is being interpreted and applied by the government. The public's need to know the rules-and how those rules are applied-is not reduced merely because, after applying the rules in a particular case, the government concludes that a plan does not qualify. Effective upon enactment of ERISA, section 6104(a) (1) (B) of the Code has required public disclosure of any letter or other document issued by the Internal Revenue Service and dealing with the qualification of a plan. The final sentence of subparagraph (B) represents the Congress' conclusion that, in the case of small plans, the general public's right to know may be outweighed by other considerations. However, even in such a case, the plan participants are entitled to have available all the material specified in any of the four clauses of subparagraph (B). Subparagraph (C) of section 6104(a)(1) provides a further exception to keep from "public inspection" any "information from which the compensation . . . of any individual may be ascertained". Apart from these two points (relating to small plans and compensation of individuals), the statutory language clearly seems to provide for public availablity of all the items referred to in any of the clauses of subparagraph (B). Nothing in any of those clauses suggests that only favorable actions by the Internal Revenue Service are to be made available to the public. When the Serv ice issues a letter determining that a plan is not qualified, that letter is as closely related to the qualification of the plan as a letter affirming the qualified status of the plan. Consequently, it appears that the Internal Revenue Service is not only authorized, but is required, to permit public inspection of a letter revoking an earlier determination that a particular plan is qualified. On behalf of the Oversight Subcommittee, I would appreciate your prompt reconsideration of the Service's position on this point. If you decide not to modify the position described by Mr. Saunders, I would appreciate a description of the reasoning supporting your decision. Sincerely, Enclosure. SAM M. GIBBONS, Chairman, Subcommittee on Oversight. Subparagraph (B) of section 6104 (a) (1) reads as follows: "(B) Pension, etc, plans.-The following shall be open to public inspection at such times and in such places as the Secretary may prescribe: "(i) any application filed with respect to the qualification of a pension, profit-sharing, or stock bonus plan under section 401(a), 403 (a), or 405 (a), an individual retirement account described in section 408 (a), or an individual retirement annuity described in section 408(b), "(ii) any application filed with respect to the exemption from tax under section 501 (a) of an organization forming part of a plan or account referred to in clause (i), "(iii) any papers submitted in support of an application referred to in clause (i) or (ii), and "(iv) any letter or other document issued by the Internal Revenue Service and dealing with the qualification referred to in clause (i) or the exemption from tax referred to in clause (ii). Except in the case of a plan participant, this subparagraph shall not apply to any plan referred to in clause (i) having not more than 25 participants." DEPARTMENT OF THE TREASURY Hon. SAM M. GIBBONS, Chairman, Subcommittee on Oversight, Committee on Ways and Means, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: On June 21, 1977, you requested that I review the position the Service had previously taken on the right of the public to inspect certain materials pertaining to the qualification of deferred compensation plans. This position was originally expressed to you on March 15, 1977 by Charles L. Saunders, Jr., then Acting Chief Counsel, when he testified before your Subcommittee on Oversight. At the time, Mr. Saunders was asked whether the publicity provisions of section 6104 (a) (1) (B) (iv) of the Internal Revenue Code would require the Service to disclose letters that revoked an earlier determination that a particular deferred compensation plan was entitled to the special tax benefits provided under the Code. Mr. Saunders responded by noting that implementing regulations had not yet been issued under section 6104(a) (1) (B). However, he did express his opinion that revocation documents issued by the Service were protected from public scrutiny. In your recent letter, you expressed your disagreement with this conclusion, and have asked that I reconsider the Service's position on this matter. Since Mr. Saunders expressed his views to you, the Service has been formulating proposed regulations to interpret Section 6104 (a) (1) (B), and to establish procedures to implement this statute's disclosure provisions. As a result of this analysis, the Service has now concluded that the language of Section 6104 (a) (1) (B) (iv) does indeed encompass final letters that are issued with regard to a termination of the qualified status of a deferred compensation plan. Because of this decision, the Service will now make these documents available to the public on request except. of course, in the case of smaller plans and when these materials contain confidential compensation information. 93-939 - 77 11 Our position on the scope of Section 6104(a)(1) (B) will be fully spelled out in the proposed regulations that I described above. We hope to publish these regulations later this year. I hope this information has been helpful to you. With kind regards. Sincerely, Commissioner. Messrs. FRANK FITZSIMMONS, et al., Trustee, c/o Central States, Southeast and Southwest Areas Pension Fund, 8550 West Bryn Mawr Avenue, Chicago, Ill. GENTLEMEN: An examination was made of Forms 990-P for the years ended January 31, 1966 through January 31, 1975. It was determined that the Central States Southeast and Southwest Areas Pension Plan does not qualify under section 501 (a) and the trust is not exempt under section 501 (a) of the Internal Revenue Code for any years beginning after January 31, 1965. The trust was not operated for the exclusive benefit of the beneficiaries under the plan as provided in section 401(a) for the following reasons: Payment of benefits were not made in accordance with the terms of the plan. Accrued benefits of participants were forfeited after retirement. Records of participants service were not sufficient to determine participants benefits under the plan. Contributions owing to the Fund by participating employers were forgiven to the detriment of plan participants. The trust failed to establish policies and procedures in Fund operations that would provide for timely and proper payment of benefits to qualifying participants. The trust computed participant benefits inconsistent with plan provisions. Investment policies and practices of the trust were imprudent as exemplified by the following. Terms of the loans designed to protect the interest of the beneficiaries in the Fund were not enforced. Trust funds were disbursed without adequate security. Trust funds were invested for a return not commensurate with the prevailing rates. Trust funds were invested without requiring reasonable repayment terms. Trust funds were invested against the advice of professional advisors retained by the trust. Trust funds disbursed to individuals known to be unworthy of trust. All determination letters issued to date are hereby revoked. You will be required to file income tax returns for each year in which the trust has taxable income. Very truly yours, District Director. |