The IRS does not believe that most employers could meet the burden met in Val Lanes. The IRS considers the ruling in Val Lanes to be very factually dependent.
The Memo issued following Val Lanes is a warning to qualified retirement plans. These facts together established for the court that a plan had been signed by the employer. The employer had suffered flooding of its premises that resulted in the loss of documents. The employer could show a pattern of signing all documents sent to it by its accountant. The Tax Court held a hearing and found credible evidence that the plan had been signed. The Tax Court previously stated that a plan communicated to the employees has no meaning if the employer lacks a written document under which the employer is contractually obligated or committed.ĭespite previous precedent, the Tax Court found that the IRS had abused its discretion in revoking the qualified status of the Val Lanes ESOP. The IRS cited previous Tax Court precedent and concluded that a failure to sign a plan document meets neither the spirit nor the letter of the law. In Val Lanes, the employer could not produce a signed ESOP document on audit. The Memo was issued as a reaction to the case of Val Lanes Recreation Center v. The Memo makes clear that if an employer cannot produce a signed plan document on audit, the employer has the burden of proving that the plan was signed when required.
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