3833. Can the IRS retroactively apply a finding that a plan does not meet qualification requirements?Nuco Employeercline202015-07-20T14:46:00Z2015-07-20T14:46:00Z34222412Summit Business Media205282914Site Map/Retirement Plans/Pension And Profit Sharing/Qualification/Retroactive Disqualificationdisqualification 2005-01-25T00:00:00ZTaxFactsDefaultArticle116430362-00-tf1.xml364.00;#2254;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1Can IRS apply retroactively its finding that a plan does not meet qualification requirements?133500.000000000TaxFactsDefaultArticle2010-01-15T01:06:51ZSBMEDIA\moss-admin3833. Can the IRS retroactively apply a finding that a plan does not meet qualification requirements?Yes. The IRS may retroactively revoke a plan’s determination letter by notice to the taxpayer if:there has been a change in the applicable law, the organization omitted or misstated a material fact,the organization has operated in a manner materially different from that originally represented, or, in the case of organizations to which IRC Section 503 applies, the organization engaged in a prohibited transaction with the purpose of diverting corpus or income of the organization from its exempt purpose, and such transaction involved a substantial part of the corpus or income of such organization..Rev. Proc. 2015-9, 2015-2 I.R.B. 249. See also Tax Consequences of Plan Disqualification at http://www.irs.gov/Retirement-Plans/Tax-Consequences-of-Plan-Disqualification.The IRS has broad discretion to determine the extent to which rulings and regulations will be given retroactive effect..Automobile Club of Mich. v. Comm., 353 U.S. 180 (1957); IRC Sec. 7805(b). The wide array of correction procedures established by the IRS in the past decade offers a choice of less severe remedies, however, and suggests that the IRS is reluctant to disqualify plans except under the most egregious circumstances.The IRS also may retroactively correct its own mistaken application of law, even where a taxpayer may have relied to the taxpayer’s detriment on the IRS’s mistake..Dixon v. U.S., 381 U.S. 68 (1965). Concerning determination letters, the IRS has voluntarily limited its authority by the issuance of revenue procedures stating the standards by which the continuing effect of a determination letter will be judged. In substance, there are two standards.First, if a published revenue ruling is issued that is applicable to a previously approved plan, to retain its qualified status the plan must be amended to conform with that ruling before the end (and effective at least as of the beginning) of the first plan year following the one in which the ruling was published..Rev. Proc. 93-6, 1993-1 CB 430, at Sec. 22. Thus, with respect to the approved plan, the revenue ruling is not given retroactive effect and becomes effective only at the beginning of the next plan year..See also Wisconsin Nipple and Fabricating Corp. v. Comm., 581 F.2d 1235 (7th Cir. 1978).Second, if no applicable published ruling affecting the qualification of the plan has intervened between the approval and the revocation of the approval, the revocation ordinarily will not have retroactive effect with respect to the taxpayer to whom the ruling was originally issued or to a taxpayer whose tax liability was directly involved in such ruling if: (1)there has been no misstatement or omission of material facts, (2)the facts subsequently developed are not materially different from the facts, on which the ruling was based, (3)there has been no change in the applicable law, (4)the ruling originally was issued with respect to a prospective or proposed transaction, and (5)the taxpayer directly involved in the ruling acted in good faith in reliance on the ruling and a retroactive revocation would be to the taxpayer’s detriment..Rev. Proc. 2015-9, 2015-2 I.R.B. 249; Sec. 12.01. See also Churchill, Ltd. Emple. Stock Ownership Plan & Trust v. Comm’r, T.C. Memo 2012-300 (2012), pet. denied, 2013 U.S. App. LEXIS 11046 (8th Cir. May 29, 2013); Lansons, Inc. v. Comm., 622 F.2d 774 (5th Cir. 1980); Oakton Distributors, Inc. v. Comm., 73 TC 182 (1979); Pittman Construction v. U.S., 436 F. Supp. 1215 (E.D. La. 1977).