In the letter published today, the subject owns assets of the telecommunications infrastructure (called systems) and intends to opt for taxation as REIT. The main components of any system are fiber optics. Each system also includes optical converters, amplifiers, antennas and other personal features related to systems that perform an active function (called “equipment”). The taxpayer enters into agreements with independent mobile operators (called users) that grant users the use of the systems for an initial period of several years, with several renewal options. A user contract requires a user to pay the taxpayer a recurring monthly or quarterly fee for the use of the systems, which can degenerate each year on the basis of a fixed amount or an index that represents inflation. In some cases, a user contract may also require, at the beginning of such an agreement, a one-time payment that the subject represents for the use of the systems over time. The IRS today issued a private letter stopped, which the IRS made available to a taxpayer who owns assets in the telecommunications infrastructure, grants wireless organizations the use of the systems in accordance with the agreements, and considers choosing the Real Estate Investment Tax (REIT) status. By purchasing and/or downloading our PLR content, you agree to the terms of this license agreement. In addition, the RRR raises questions about common service agreements in general.
Many non-profit organizations use common service agreements to effectively customize the operation of their subsidiaries and spread the costs of these services among different companies. For example, a not-for-profit organization that develops an independent taxable corporation could decide to create a for-profit subsidiary to manage the business. Instead of recruiting separate staff and building human and technological resource infrastructure for the for-profit business, a non-profit organization will make its employees and other resources available to the for-profit subsidiary as part of a common services agreement and will spread the costs between non-profit and not-for-profit entities. The IRS has adopted numerous PLRs that approve these agreements and conclude that the activities of the separately incorporated subsidiary would not be attributed to the not-for-profit parent company. Conversely, in the LLP, the IRS treated the non-profit organization in such a way that it provided the services directly. In particular, during the discussion of the PLR, an IRS lawyer recently stated publicly that the IRR`s findings were highly dependent on the facts and circumstances described and that the IRS was not satisfied with the statements of this special non-profit organization, that there would be an adequate separation between the non-profit organization, the for-profit subsidiary and the CAP. On the basis of these concerns, the IRS chose, in the scenario described in the PLR, to ignore the common services agreement and the separation of the business for the for-profit corporation, so that the activities of the subsidiary and cap were allocated to the non-profit parent company – which is ultimately inadmissible for an organization exempted under Section 501 (c) (3). The non-profit organization, a Section 501 (c) (3) organization, was the parent company of a health care system and provided management, advisory and other services for its affiliated health facilities and educational institutions 501 (c) (3).