Professional & Executive Leasing, Inc., an Idaho Corporation, Petitioner v. Commissioner Internal Revenue Service

Professional & Executive Leasing, Inc. (PEL) appeals a decision by the tax court in its action for declaratory relief. The tax court determined that PEL’s retirement plans did not qualify under I.R.C. § 401 because the plans covered individuals who were not employees of PEL. Thus, the requirement of § 401(a)(2) that a qualifying plan be for the “exclusive benefit” of the employer’s employees was not met. We Affirm.

FACTS

PEL is a for profit corporation organized under the laws of the State of Idaho for the purpose of “leasing” management personnel, consultants, and licensed professionals (such as attorneys, accountants, dentists, and engineers) to businesses (recipients).

PEL filed a petition for declaratory relief seeking a determination that its retirement plans met the requirements of I.R.C. § 401. PEL entered into an arrangement entitled “Contract of Employment” (contract) with the individuals covered by the plans. Workers under the contract participate in a pension plan, benefit plan, and a fringe benefit program. PEL also entered into an arrangement with the recipients entitled “Personnel Lease Contract” (lease).

PEL prepares the workers’ paychecks and withholds Federal…