¶1concurring in the result: I agree with much of the majority’s opinion and with the majority’s result. However, I disagree with the majority’s analysis of the retroactive revocation of the favorable determination letter. Section 415(a)(1)(B) provides as follows:
¶2SEC. 415. LIMITATIONS ON BENEFITS AND CONTRIBUTIONS UNDER QUALIFIED PLANS.
(a) General Rule —
(1) Trusts. — A trust which is part of a pension, profit-sharing, or stock bonus plan shall not constitute a qualified trust under section 401(a) if—*******
(B) in the case of a defined contribution plan, contributions and other additions under the plan with respect to any participant for any taxable year exceed the limitation of subsection (c), …
¶3This provision, by its own terms, applies automatically and depends on the facts as they occur year-by-year. Although we generally test the retroactivity of revocations of favorable determination letters under an abuse-of-discretion standard, section 415(a)(1)(B) cannot be tested on any basis other than after-the-fact, and so the loss of tax-qualified status because of a violation of that statute can only be on a retroactive basis. Respectfully, I suggest that the discussion of abuse of discretion as to retroactivity of the revocation is inappropriate regarding violations of section 415(a)(1)(B).
¶4The provisions of section 1.415-6(b)(6), Income Tax Regs., raise a different abuse-of-discretion issue. The lead-in language of subparagraph (6) provides for automatic relief from disqualification in some cases and discretionary relief in other cases. The first circumstance — allocation of forfeitures — appears to be automatic; i.e., the amounts can be calculated and it can be objectively determined whether an excess addition results from the allocation of forfeitures. The second circumstance — reasonable error in estimating annual compensation — may well involve standards of reasonableness; that issue is not before us in the instant case. The third circumstance — “other limited facts and circumstances which the Commissioner finds justify the availability of the rules set forth in this subparagraph” — is clearly discretionary and is before us.
¶5It is up to respondent to decide whether he will find that relief is justified, and to set reasonable conditions for granting relief. It is then up to us to review respondent’s determination on an abuse-of-discretion basis. Respondent’s insistence that the plan be amended to put in place an automatic correction system is not unreasonable. Indeed, it clearly would have been the prudent thing for the employer to do, as a fail-safe measure, before the years in issue. The employer failed to comply with respondent’s reasonable conditions for exercising his discretion to “let the employer off the hook”.
¶6Respondent’s conditions were reasonable, and that should end the matter.
¶7Respectfully, I suggest that the opinion tends to confuse the issue by focusing on the retroactive revocation cases, which generally have involved a degree of subjectivity and highly imprecise standards. If respondent were mistakenly to issue a determination letter approving a plan that provided for excessive contributions or benefits in violation of section 415, and the taxpayer were to rely on this approval and so were to make excessive additions or cause excessive benefits to be paid, then a retroactive revocation might arguably be subject to an abuse of discretion review. However, that did not happen in the instant cases. In the instant cases, the statute is clear and reasonably precise; as a practical matter, the statute’s text seems to require retroactive revocation. I submit that, under the text of section 415, the majority’s conclusion — “that the operational errors in the instant case were a material change in the facts on which the plan’s favorable ruling was based” (majority opinion at 653) — is irrelevant.