Sherwin-Williams Company Employee Health Plan Trust - Page 14




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          512(a)(3)(E)(i) is “plainly restricted to only set-asides for the           
          payment of benefits described in I.R.C. �512(a)(3)(B)(ii), and              
          thus, its application does not extend to Exempt Function Income             
          arising from member contributions, set-asides for charitable                
          purposes, or administrative costs.”                                         
               Respondent counters that reasonable costs of administration            
          directly connected with a purpose described in section                      
          512(a)(3)(B)(i) or (ii) do not constitute an independent source             
          or component of exempt function income under section                        
          512(a)(3)(B).  In support of that position, respondent argues:              
                    It is clear the statute [section 512(a)(3)(B)] is                 
               written so that the reasonable cost of administration                  
               phrase did not have to be written twice, that is once                  
               after clause (i) and again after clause (ii).  This is                 
               a common drafting technique used throughout the Inter-                 
               nal Revenue Code. * * *                                                
                    Another way of describing exempt function income                  
               is income set-aside [sic] for a purpose specified in                   
               section 170(c)(4) including administrative costs di-                   
               rectly connected with this purpose or, in the case of                  
               an organization described in paragraph (9), (17), or                   
               (20) of section 501(c), to provide for the payment of                  
               life, sick, accident, or other benefits, including                     
               reasonable costs of administration directly connected                  
               with this purpose.  This is the clear meaning of this                  
               section [512(a)(3)(B)].  Accordingly, administrative                   
               costs are a part of the benefit costs which may be set-                
               aside [sic] under clauses (i) and (ii) of I.R.C. �                     
               512(a)(3)(B), not a separate component thereof.                        
               We first address the premises of the Trustee’s position                
          under section 512(a)(3)(E)(i), namely, its contentions that the             
          plain language of section 512(a)(3)(B) identifies four sources or           
          components of exempt function income and that one of those                  





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