IRS proposes regulations on VEBA geographic locale requirement

Article Abstract:

The IRS has given more guidance on the 'geographic locale' requirement for voluntary employees' beneficiary associations (VEBAs) under IRC 501(c)(9). Employees of one or more employers doing business in the same 'geographic locale' are considered to share the 'employment-related common bond' required for recognition as a VEBA, and the proposed regulations further define when larger areas can qualify as single geographic locales. The definition has been made more specific to prevent abuse by organizations qualifying as VEBAs so they can engage in unrelated business income activities tax-free.

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Gains from short sales by qualified plan do not result in UBTI or unrelated debt-financed income

Article Abstract:

The IRS found in PLR 9703027 that a profit sharing fund that engaged in short selling would not be subject to unrelated business income tax under IRC section 512 or debt-financed income under section 514. The plan was funded with cash and deferred compensation. The plan established a margin account and engaged in short sales in publicly traded securities. The IRS found that exemptions under section 512 applied and that short sales were not considered indebtedness under section 514.

Regulation, Licensing, and Inspection of Miscellaneous Commercial Sectors, Pension & Benefit Regulation, United States, Pensions, Deferred compensation, Short selling, Profit sharing

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Termination of employee-funded VEBA does not result in UBTI; distributions to participants taxable only to the extent they exceed their contributions

Article Abstract:

The IRS ruled that the account distributions from termination of a voluntary employees' beneficiary association (VEBA) were exempt function income according to s. 512(a)(3)(B) and (E). Under s. 512(a)(3)(A), net assets distributions did not result in unrelated business taxable income and only distributions above individual premiums could be included in participants' income.

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