QSLOBQualified Separate Lines of Business
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A number of provisions already exist within the Code and regulations requiring collection of employee census data or allocation and apportionment of employee time and compensation expense (e.g., for purposes of sections 253A, 482, and 861 of the Code.) TEI objects to the imposition of yet another independent survey test for purposes of QSLOB relief.
Indeed, the trend in American business toward "right-sizing" of the workforce, while reducing the absolute size of corporate staff, will concomitantly increase the number of employees who serve multiple lines of business and, consequently, decrease the utility of the QSLOB rules.
Section 414(q)(11) specifically excludes such nonresident aliens from QSLOB testing.
Even assuming, arguendo, the IRS's statutory authority to include nonresident aliens within the scope of the QSLOB rules, there are practical reasons for not doing so.
In summary, TEI questions why another "top-paid" employee group must be tested under the QSLOB rules, especially since the test can result in the combination of union and non-union employees.
The separate-tangible-asset test may be one of the most onerous burdens placed on the taxpayer by the QSLOB regulations, and may well be the decisive factor in an employer's electing not to use section 414(r).
TEI recommends that the regulations accord employers an opportunity to change its election upon audit or its first return in which the QSLOB rules have significance.
Mandating a timely filed Form 10-K without extensions satisfies no reasonable tax purpose, especially since that Form 10-K deadline is March 30 -- before the filing of the Form 5500 and before most data is collected to make QSLOB determinations.
Nothing in the legislative history of the QSLOB rules suggests that Congress intended ot discourage the use of profit-sharing plans in order to use section 414(r).
In summary, TEI believes that flexibility and proportionality are the keys to successful implementation of the QSLOB regulations.
Section 410(b)(5) provides an exception to this general rule for purposes of section 410(b) if the employer operates QSLOBs under section 414(4).
Section 414(r)(2)(B) requires the employer to notify the Secretary when the employer treats itself as operating QSLOBs. The preamble anticipates that a standard notice will be incorporated into the Form 5300 (Application for Determination for Employee Benefit Plan) or Form 5310 (Application for Determination Upon Termination; Notice of Merger, Consolidation or Transfer of Plan Assets or Liabilities; Notice of Intent to Terminate).