Saturday, February 8, 2014
The IRS issued proposed regulations relating to how much income 501(c)(9) voluntary employee beneficiary associations, 501(c)(17) supplemental employment benefit trusts, and 501(c)(20) group legal services organizations may set aside as exempt function income that is excluded from unrelated business taxable income and so exempt from the unrelated business income tax. While that exhausts my knowledge of the substance of the proposed regulations, what is striking is that the proposed regulations replace proposed regulations issued in 1986 to implement a 1984 statutory change. Affected groups have not been without guidance for all of this time - temporary regulations were issued in 1986 as well - but the fact that the guidance has yet to be finalized raises the question of what happened. Did the 1986 proposed regulation simply fall off someone's to do list? Did the employee taking the lead on these regulations retire? Of course, today the situation would have been more urgent because under 26 U.S.C. 7805(e), enacted in 1988, temporary regulations expire within three years after their date of issuance - but that provision did not apply retroactively to already issued temporary regulations.