Do Code sections 419 and 419A apply to governmental employers?

[Guest danwintz]

I read a commentary that says that Code sections 419 and 419A do not apply to governmental employers. No citation in support of the statement was given. Is this correct? I haven't been able to locate authority for this statement. Any help you can give me (either way) will be appreciated.

Thank You,

Dan Wintz

[Carol V. Calhoun]

The exemption of governmental plans from 419 and 419A actually has two components. Governmental plans are exempt from the deduction rules in 419 and 419A themselves because governments don't pay income taxes, and therefore aren't concerned about income tax deductions. Governmental plans are exempt from the parallel unrelated business taxable income rules of 512(a)(3) because of 512(a)(3)(E)(iii), which exempts a welfare fund if substantially all of the contributions were made by tax-exempt organizations. (There is also a whole issue of whether a governmental plan--retirement OR welfare--can ever be subject to UBIT, but you'll have to wait for my book to come out for the answer to that one, because it's WAY too complicated for a message board!)