IRS TO STOP RULING ON COMMON TRUST FUND QUALIFICATION.

Rev. Proc. 92-51

SECTION 1. PURPOSE

This revenue procedure provides guidance to banks that want to draft common trust fund plans that will meet the requirements of section 584 of the Internal Revenue Code.

SEC. 2. BACKGROUND

In the past, the Internal Revenue Service has received and responded to requests for rulings regarding the qualification of funds as common trust funds. In many of these requests, there was no material legal issue that needed clarification. Consequently, the Service is issuing this revenue procedure in order to save the time and expense of both taxpayers and the Service involved in obtaining a ruling on the qualification of a proposed common trust fund plan. The common trust fund plan is the written instrument that governs the common trust fund. The common trust fund is the entity itself.

SEC. 3. SCOPE AND OBJECTIVE

This revenue procedure is designed to give taxpayers guidance in drafting common trust fund plans that will comply with the requirements of section 584 of the Code and Income Tax Regulations thereunder. The revenue procedure is not intended to set forth all of the detailed provisions found in a common trust fund plan or to provide a sample plan. The Service will recognize a common trust fund plan drafted in accordance with the guidelines contained in this revenue procedure as meeting the requirements for qualification under section 584 and the regulations thereunder provided that the plan adopted does not contain any language that is inconsistent with the guidelines herein. A bank that follows these guidelines in drafting a common trust fund plan will not ordinarily need to request a ruling that the plan satisfies the requirements of section 584 and the regulations.

Rev. Proc. 92-50, this page, this Bulletin, provides that the Service will not ordinarily rule on whether a plan satisfies the requirements of section 584 of the Code and the regulations. However, in cases where the terms of a proposed common trust fund plan do not fall within the guidelines set forth in this revenue procedure and the bank raises an issue under section 584 that needs to be resolved, the Service will consider a ruling request.

Whether a common trust fund is properly maintained and operated under the rules of section 584 of the Code and in conformity with the rules and regulations of the Comptroller of the Currency can only be determined after an agent of the Internal Revenue Service examines the books and returns of the common trust fund. This revenue procedure does not apply to a fund that registers as an investment company under the Investment Company Act of 1940, 15 U.S.C.A. sections 80a-1 to 80a-64 (West 1981 and Supp. 1992).

SEC. 4. GUIDELINES

01 The plan must provide that the common trust fund is to be maintained by a "bank" within the meaning of section 581 of the Internal Revenue Code. For these purposes, two or more banks that are members of the same affiliated group (within the meaning of section 1504) are treated as one bank for the period of affiliation with respect to any fund of which any of the member banks is trustee or two or more of the member banks are co-trustees.

02 The plan must provide that the bank must have exclusive managerial and investment authority over the common trust fund. If that authority is delegated to a committee, that committee must be limited to bank officers, directors, and employees. This revenue procedure does not apply to any plan that permits the delegation of management and investment of the fund to non-bank persons.

03 The plan must provide that the common trust fund is created and maintained exclusively for the collective investment and reinvestment of contributions to the fund by the bank or an affiliated bank, either acting alone or with one or more other fiduciaries, in its capacity as a trustee, executor, administrator, guardian, or custodian of accounts. The "custodian of accounts" capacity is permissible in the instrument only if the Secretary has determined that the accounts are established pursuant to a state law that is substantially similar to the Uniform Gifts to Minors Act as published by the National Conference of Commissioners on Uniform State Laws, and with respect to which the bank has duties and responsibilities similar to duties and responsibilities of a trustee or guardian. See Rev. Rul. 81-102, 1981-1 C.B. 369, for a list of state laws that the Service has determined are substantially similar to the Uniform Gifts to Minors Act of 1956 or the Uniform Gifts to Minors Act of 1966, for purposes of section 584(a)(1)(B) of the Code. Rev. Rul. 81-102 provides that banks that are custodians of accounts under the state laws listed in the revenue ruling have duties and responsibilities similar to duties and responsibilities of a trustee or guardian for purposes of section 584(a)(1)(B)(ii).

04 If the plan provides that the bank or an affiliated bank may make contributions to the common trust fund in a capacity or capacities other than those specifically set forth in section 584 of the Code, this revenue procedure applies only if the Service has published a revenue ruling that these capacities are substantially similar to that of a trustee, executor, administrator, or guardian. See, e.g., Rev. Rul. 78-319, 1978-2 C.B. 184, and Rev. Rul. 74-343, 1974-2 C.B. 176.

05 The plan must provide that the bank or any affiliated bank, in its capacity as a trustee, executor, administrator, guardian, or custodian of accounts, must act as a fiduciary or co-fiduciary of the participants in the common trust fund and must have full fiduciary powers, including management, administrative, and investment authority.

06 The plan must provide that the common trust fund must be maintained by the bank or an affiliated bank in conformity with (i) the rules and regulations, prevailing from time to time, of the Comptroller of the Currency, pertaining to the collective investment of trust funds for national banks (whether or not the bank is subject to the jurisdiction of the Office of the Comptroller of the Currency); (ii) section 584 of the Code and the regulations thereunder; and (iii) other applicable federal and local laws.

07 If liquidating or segregated accounts are used to segregate investments in the common trust fund, the plan must provide that these accounts are subject to and governed by all the provisions of the common trust fund plan. The plan must provide that interests in the common trust fund, including any liquidating or segregated accounts, may not be represented by transferable certificates.

08 The plan must provide that admissions to and withdrawals from the fund by participants must be made on the basis of a valuation of the assets in the fund, and as of the date of the valuation.

SEC. 6. EFFECTIVE DATE

This revenue procedure is effective on and after June 29, 1992, the date of publication of this revenue procedure in the Internal Revenue Bulletin.

DRAFTING INFORMATION

The principal author of this revenue procedure is James A. Quinn of the Office of Assistant Chief Counsel (Passthroughs and Special Industries.) For further information regarding this revenue procedure contact James A. Quinn on (202) 566-3158 (not a toll-free call).