ABA Retirement Plan Provider Not Tax Exempt

     (CN) – A provider of retirement plans for members of the American Bar Association does not qualify for tax-exempt status, the 7th Circuit ruled.
     For-profit ABA Retirement Funds sue the federal government in 2009 in Chicago federal court, alleging it should be tax exempt as a “business league” under the Internal Revenue Code.
     The tax code allows for such exemptions for business leagues, chambers of commerce, real-estate boards, boards of trade or professional football leagues that are non-profit and do not pay net earnings to private shareholders. The trial court ultimately disagreed with ABA Retirement and granted the IRS summary judgment.
     A three-judge panel with the Chicago-based 7th Circuit agreed, unanimously affirming the dismissal.
     Writing for the panel, Judge Diane Wood said the retirement plan “provides benefits to individual persons” and “not to an entire field of commerce,” disqualifying it from business league status.
     “ABA Retirement fails to satisfy this requirement for at least two reasons: first, it characterized its business as the provision of individual benefits; and second, it has not shown anything that could reasonably be called improvement of business conditions for the legal profession generally,” the 12-page opinion stated.
     ABA Retirement treated itself as a taxable entity until 2004, when it filed for tax-exempt status and was denied in 2005. Before then, its revenues “were not large enough to raise tax concerns,” the opinion stated.
     The appeals court disagreed with ABA Retirement’s argument that its retirement plans were approved by the IRS and that a condition of the approval was that the organization had characteristics “similar to” a business league.
     “Unfortunately, this is a bridge too far,” Wood wrote. “As a matter of logic, simply because x has “characteristics similar to” y does not necessarily make x a y. A cucumber has characteristics similar to a zucchini but it is not, in fact, a zucchini. And, while having characteristics similar to a zucchini may be enough for some purposes (for instance, to stand in as a zucchini in an impressionist still life), it will not be enough when an object possessing all the characteristics of a zucchini – in other words, a zucchini itself – is required.”
     ABA Retirement did not immediately respond to a request for comment Wednesday afternoon.

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