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Answers are provided by S. Derrin Watson, JD, APM
Effect of ASG Determination Letter
(Posted March 16, 2017)
Question 337: If the IRS just issued a determination letter to client on a Cycle E submission ruling there was not an affiliated service group, can we hang our hat on that "forever," provided the facts and circumstances never change? Frankly, we were surprised they ruled in that fashion.
You ask an excellent question, and there is no reason why the answer should not be yes. It is true the IRS has stopped giving determination letters on ASG status. But that does not mean letters previously issued become invalid. Determination letters no longer have an expiration date, so indeed you should be able to continue to rely on your letter if your facts remain the same.
I want to address your surprise at the determination. One of the wonderful things about the ASG determination letter process is that the IRS was willing to issue favorable letters, even when the "letter of the law" would indicate a different result. Several times, I told employers that I would opine that an ASG existed, or that the question was close. I urged the clients to file with the IRS in the hopes that the Service would look at the equities of the situation and mitigate what was a harsh approach. (For example, it's one thing to say a doctor and her staff have a single employer under the ASG rules; it is sometimes quite another to say the doctor must be aggregated with the local hospital.) Frequently the IRS accommodated.
But all that is in the past. The Treasury is reviewing the ASG regulations, perhaps with the hope of finalizing them. That would be wonderful. Next year the proposed regulations will be old enough to run for President of the United States. Perhaps as a part of the process the Treasury can add some of those safeguards, such as the professional corporation exemption which appears in the proposed regulations. Some carefully crafted exceptions can do much to provide certainly in an increasingly uncertain environment.
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