Rev. Rul. 71-276

Advice has been requested whether, under the circumstances described below, a hospital is required to file a Form SS-15, Certificate Waiving Exemption from Taxes Under the Federal Insurance Contributions Act, and a Form SS-15a, List to Accompany Certificate on Form SS-15 Waiving Exemption from Taxes Under the Federal Insurance Contributions Act, pursuant to section 3121(k) of the Federal Insurance Contributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954).

M, a hospital that is exempt from income tax under section 501(a) of the Code as an organization described in section 501(c)(3) was incorporated for the purpose of taking over the operations of three hospitals, X, Y, and Z. Each of the three hospitals is exempt from income tax under section 501(a) of the Code as an organization described in section 501(c)(3) and each had filed Form SS-15 and Form SS-15a in order to extend social security coverage to their respective employees. Upon the incorporation of M, the employees of X, Y, and Z became the employees of M. M wishes to continue social security coverage for its employees and inquires as to whether the employees will continue to be covered by the waiver certificates filed by X, Y, and Z or if it will be necessary for M to file a new waiver certificate.

The fact that an organization may be the continuing or "successor employer," for purposes of section 3121(a)(1) and the regulations thereunder, does not eliminate the requirement for filing Form SS-15 and Form SS-15a by the organization. For these purposes the employees of X, Y, and Z are considered to have terminated their employment with such hospitals and to have become employees of M upon its incorporation. This is so, notwithstanding the fact that M may qualify as a "successor employer." See Revenue Procedure 69-9, C.B. 1969-1, 400, for a definition of, and reporting requirements pertaining to, a "successor employer."

Accordingly, it is held that M must file a waiver certificate pursuant to section 3121(k) in order to waive the exemption from "employment" provided by section 3121(b)(8)(B) with respect to the services of its employees.