Sherwin-Williams Company Employee Health Plan Trust - Page 15




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          sources or components of exempt function income is reasonable               
          costs of administration directly connected with a purpose de-               
          scribed in section 512(a)(3)(B)(i) or (ii).  While we agree with            
          the Trustee that the language of section 512(a)(3)(B) is unambig-           
          uous, we conclude that the plain language of section 512(a)(3)(B)           
          rejects the Trustee’s contentions.                                          
               Section 512(a)(3)(B) unambiguously defines the term “exempt            
          function income” to mean gross income from two sources only.                
          Moreover, section 512(a)(3)(B) plainly does not treat reasonable            
          costs of administration directly connected with a purpose de-               
          scribed in section 512(a)(3)(B)(i) or (ii) as income or as a                
          source or component of income.                                              
               The first source of gross income from which exempt function            
          income may be derived is specified in the first sentence of                 
          section 512(a)(3)(B) as “gross income from dues, fees, charges,             
          or similar amounts paid by members of the organization”.  How-              
          ever, in order to qualify as exempt function income, such gross             
          income specified in the first sentence of section 512(a)(3)(B)              
          must be paid by the organization’s members “as consideration for            
          providing such members or their dependents or guests goods,                 
          facilities, or services in furtherance of the purposes constitut-           
          ing the basis for the exemption of the organization to which such           
          income is paid.”                                                            
               The second source of gross income from which exempt function           






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Last modified: May 25, 2011