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Do the ASG management group rules apply to businesses that are service businesses? For example, would it apply to car dealerships? Or so the recipient business who receives the services from a management company have to be a service based company?

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Here is an excerpt from something by the CG/ASG Guru, Derrin Watson. I would recommend ERISA counsel if you have an actual situation:

Code section 414(m)(5) also provides for management affiliated service groups. A "management affiliated service group" is a group consisting of [Code Section 414(m)(5)]:

(A) an organization, the principal business of which is performing, on a regular and continuing basis, management functions for an organization or for an organization and other organizations related to the organization, and

(B) the organization and related organizations for which such functions are so performed by the organization described in subparagraph (A).

Note that unlike organizations affiliated under other provisions of section 414(m), 1) there is no requirement of common ownership of the managing and managed entities; and 2) is there is no requirement that any members of the group be a "Service Organization."

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And to help discern the meaning of, or find support for an interpretation of, § 414(m)(5), consider the Conference Committee Report on the Tax Equity and Fiscal Responsibility Act of 1982.

Many judges now disfavor legislative history as a way to interpret an enacted text.

Yet, for older statutes, especially tax legislation, it can be a useful source of background information. A staff explanation about Congress’s reason for legislating (even if partly or wholly imagined) can suggest useful clues to interpret the enacted text.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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  • 2 weeks later...

The main point of 414(m)(5) was to prevent, e.g., an individual who might have been President of a company, including a public company that was in the manufacturing or another non-service business, and who might not have any ownership in the company for which the management functions were provided, from providing his or her management services through a personal corporation that might, e.g., sponsor a DB plan for that single individual. So sure, the recipient of the management functions does not have to be a service company, just based on the statute, even in absence of regs or any other guidance.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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