Rev. Rul. 78-7

Advice has been requested whether, under the circumstances described below, an organization exempt from Federal income tax that has filed a waiver certificate, Form SS-15, Certificate Waiving Exemption from Taxes Under the Federal Insurance Contributions Act, together with a Form SS-15a, List to Accompany Certificate on Form SS-15 Waiving Exemption From Taxes Under the Federal Insurance Contributions Act, waiving its exemption from taxes under the Federal Insurance Contributions Act (FICA) (chapter 21, subtitle C of the Internal Revenue Code of 1954) may terminate its waiver certificate.

The organization was granted an exemption from Federal income tax under section 501(a) of the Code as an organization described in section 501(c)(3) more than 10 years ago. As such, the services performed for it are excepted from employment under section 3121(b)(8)(B) of the FICA and remuneration paid to its employees is not subject to the taxes under the Act unless, under section 3121(k), the organization files a waiver certificate, Form SS-15, waiving its exemption from the taxes under the Act, together with a Form SS-15a, containing a list of employees, if any, who concur in the filing of the waiver.

The organization filed a valid SS-15 with a Form SS-15a containing the names of its concurring employees. The Form SS-15 has been in effect for 10 years. The organization has paid and reported FICA taxes on all affected employees since the effective date of the Form SS-15.

The organization desires to establish an alternative retirement plan for its employees and to terminate its waiver certificate under the FICA. In order to secure the funds necessary for the new plan as soon as possible, the organization has requested, in writing, that the waiver be terminated immediately.

Section 3121(k)(1)(D) of the FICA and the regulations thereunder permit an organization to terminate its waiver at the end of a specified calendar quarter by giving 2 years' advance notice in writing to the Internal Revenue Service official with whom the organization is required to file its returns. This provision is applicable only if at the time of the receipt of such notice, the certificate has been in effect for a period of not less than 8 years. See Rev. Rul. 74-415, 1974-2 C.B. 337.

In the instant case, although the waiver certificate has been in effect for a period of 10 years, the organization has not given 2 years' advance notice of its intention to terminate.

Accordingly, although the organization has given written notice to the Service requesting immediate termination of its waiver certificate, its waiver certificate may not be terminated until the required 2 year period has elapsed.

This conclusion would be the same even if the organization had not actually filed Forms SS-15 and SS-15a, but was deemed to have done so under section 3121(k)(4) or 3121(k)(5) of the FICA by paying the taxes during any period of not less than three consecutive calendar quarters after 1972. Section 3121(k)(1)(D) is applicable to sections 3121(k)(4) and 3121(k)(5) as stated in section 3121(k)(6).