4.76.19  Teachers' Retirement Fund Associations - IRC 501(c)(11)  (01-01-2003)

  1. This IRM section contains specific examination guidelines for an organization recognized as exempt from income tax under IRC section 501(a) as an organization described in IRC section 501(c)(11). It provides examination techniques effective in identifying and developing issues commonly encountered during the examination of an IRC 501(c)(11) organization.

  2. These guidelines provide specific assistance for the examination of an IRC 501(c)(11) organization and are not all-inclusive. The purpose is to supplement the guidelines contained in IRM 4.75.10 through IRM 4.75.13. The intent is not to restrict the examiner in identifying issues or using examination techniques not included herein.

  3. This IRM does not contain detailed technical information regarding IRC 501(c)(11) organizations. The examiner should review the technical information in contained in IRM 7.25 11.  (01-01-2003)
Background Information

  1. IRC section 501(c)(11) provides for the exemption of teachers' retirement associations of a purely local character. Its sources of income are limited to amounts from public taxation, assessments of members, and investment income.  (01-01-2003)
Examination Guidelines

  1. Inspect governing instruments and evaluate actual operations to determine:

    1. If activities are confined to a territorial unit purely "local in character."

    2. If memberships other than that of teachers are only incidental and are limited to school employees.

  2. Analyze all sources of income to determine:

    1. Whether income consists solely of amounts received from public taxation, amounts received from assessments on teaching salaries of members, and income in respect of investments.

    2. Whether a business activity is being conducted under the guise of an investment.

  3. Test check and trace disbursements to ascertain that no part of the organization's net earnings except for retirement benefits inures to the benefit of any private shareholder or individual.

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