Despite having lost twice in federal appeals courts, the Internal Revenue Service continues to challenge low interest rates and early retirement ages assumed by small employers in the late 1980s, asserting the assumptions allowed employers to take tax deductions for pension contributions that were too high.
The IRS also has refused to dismiss almost 4,000 audit cases in its small plan audit program instituted in 1989.
In its latest battle, the IRS is asking the 6th U.S. Circuit Court of Appeals to overturn a ruling by the U.S. District Court for the Western District of Michigan that upheld a 5% rate of return and retirement age of 55 for the Michigan law firm of Rhoades, McKee and Boer.
The IRS had challenged $345,921 in tax deductions claimed by the firm between 1986 and 1988.
Last November, the 5th U.S. Circuit Court of Appeals upheld a 5% interest rate and retirement age of 62 assumed by the Washington law firm of Vinson & Elkins, and last month the U.S. 2nd Circuit Court of Appeals upheld as reasonable the 5% rate of return and retirement age of 55 assumed by the New York law firm of Wachtel, Lipton, Rosen & Katz.
A fourth appeals court decision in Citrus Valley vs. Commissioner is still pending.
"They are obviously hoping for a conflict in the appeals courts so they can take it to the Supreme Court," noted Leon E. Irish, vice president and senior counsel at Aetna Life & Casualty, Hartford, Conn.
