Golden Belt Telephone Association, Inc. - Page 9

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               Based on the 1985 Detariffing Notice, the 1986 Detariffing             
          Order, and the changed accounting system, the TAM concluded                 
               that the billing and collection function is a                          
               "financial and administrative service."  The functions                 
               comprising billing and collection (data processing,                    
               creating, mailing and collecting invoices), are common                 
               accounting functions, not unique to the telephone                      
               industry.  * * * A "financial and administrative                       
               service" which credit card companies can perform as                    
               ably as LECs [local exchange carriers], cannot be a                    
               "communication service involving the completion of long                
               distance calls."  Treas. Reg. sec. 1.501(c)(12)-1(c).                  
               * * * [Fn. ref. omitted.]                                              
          Id.  Because the IRS concluded in the TAM that telephone                    
          cooperatives provide B & C services in the same manner as other             
          nonexempt organizations, it ruled that B & C income is unrelated            
          trade or business income of the cooperative.  Id.  Recognizing              
          that the TAM "may have caused the inadvertent disqualification of           
          many telephone companies from tax exempt status", the IRS, in               
          Notice 92-33, 1992-2 C.B. 363, indicated that it would apply the            
          new provisions of the TAM for tax years beginning after December            
          31, 1990.  Thus, the IRS seeks to apply the TAM for the years at            
          issue here, namely, 1991, 1992, and 1993.                                   
               Meanwhile, in 1989, the FCC issued another decision, In the            
          Matter of Pub. Serv. Commn. of Md., 4 FCC Rcd 4000 (1989) (1989             
          FCC Decision), in which it softened the position it had taken in            
          the 1986 Detariffing Order.  The decision stated:                           
                    Billing and collection services of the kind                       
               provided by C&P for AT&T directly affect the conditions                
               under which interstate carriers offer transmission                     
               services.  The rates that LECs [local exchange                         
               carriers] charge for billing and collection directly                   
               affect the costs of providing interstate transmission                  



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