IRS Updates List of Permissible Reasons for 60-day Rollover Waiver; Includes Distributions to a State Unclaimed Property Fund

(Parker Tax Publishing October 2020)

The IRS modified and updated Rev. Proc. 2016-47, which provides a list of permissible reasons for self-certification of eligibility for a waiver of the 60-day rollover requirement under Code Sec. 402(c)(3) and Code Sec. 408(d)(3)(I) to add a new reason: a distribution was made to a state unclaimed property fund. The new procedure also provides examples of situations in which a distribution would not be eligible to be rolled over and includes model language that may be used for self-certification. Rev. Proc. 2020-46.

Background

Under Code Sec. 402(c)(3)(A) and Code Sec. 408(d)(3)(A), a taxpayer generally may roll over, tax free, any amount distributed from a qualified plan or individual retirement arrangement (IRA) if it is transferred to an eligible retirement plan by the 60th day after the taxpayer receives the distribution. A similar rule applies to Code Sec. 403(a) annuity plans, Code Sec. 403(b) tax sheltered annuities, and Code Sec. 457 eligible governmental plans.

Under Code Sec. 402(c)(3)(B) and Code Sec. 408(d)(3)(I), the IRS may waive the 60-day rollover requirement where the failure to do so would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the taxpayer. Rev. Proc. 2003-16 provides for automatic approval for a waiver of the 60-day rollover requirement in certain circumstances in which a rollover is not made timely due to an error on the part of a financial institution. Taxpayers who do not qualify for an automatic waiver can apply for a waiver by submitting a request for a private letter ruling under the procedures outlined in Rev. Proc. 2016-4.

In Rev. Proc. 2016-47, the IRS provided a self-certification procedure that may be used by a taxpayer claiming eligibility for a waiver under Code Sec. 402(c)(3)(B) or Code Sec. 408(d)(3)(I) with respect to a rollover into a plan or IRA. Rev. Proc. 2016-47 provides that a plan administrator, or an IRA trustee, custodian, or issuer (IRA trustee), may rely on the certification in accepting and reporting receipt of a rollover contribution. Rev. Proc. 2016-47 also modified Rev. Proc. 2003-16 by providing that the IRS may grant a waiver during an examination of the taxpayer's income tax return.

Rev. Proc. 2020-46

On October 16, the IRS issued Rev. Proc. 2020-46, which modifies and updates Rev. Proc. 2016-47 to provide a list of permissible reasons for self-certification of eligibility for a waiver of the 60-day rollover requirement. In response to requests from stakeholders, the IRS modified the list by adding a new reason: a distribution that was made to a state unclaimed property fund.

As under Rev. Proc. 2016-47, a self-certification relates only to the reasons for missing the 60-day deadline, not to whether a distribution is otherwise eligible to be rolled over. Rev. Proc. 2020-46 provides examples of situations in which a distribution would not be eligible to be rolled over. In addition, the procedure includes an appendix setting forth model language that may be used for self-certification.

In addition, Rev. Proc. 2020-46 modifies Rev. Proc. 2003-16 to provide that, in addition to automatic waivers and waivers through application to the IRS, the IRS, in the course of examining a taxpayer's individual income tax return, may determine that the taxpayer qualifies for a waiver of the 60-day rollover requirement under Code Sec. 402(c)(3)(B) or Code Sec. 408(d)(3)(I).

For a discussion of rollovers of distributions from qualified plans, see Parker Tax ¶131,550. For a discussion of rollovers of distributions from traditional IRAs, see Parker Tax ¶134,540.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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