Instructions For Form 1120-Sf - (Rev. Sept. 1996) (Page 3 of 4) in pdf

distribution. For example, if the

any state, including the District of

transferor in a separate bank account

satisfies the segregation requirement.

distribution is for wages, report the

Columbia, territory, possession, or

distribution on Form W-2.

political subdivision thereof, or any

Classification of fund prior to meeting

agency or instrumentality (including a

all three requirements.—If a fund

For more information, see the

court of law) of any of the foregoing, and

instructions for Forms 1099, 1098, 5498,

meets the resolve or satisfy requirement,

is subject to the continuing jurisdiction

and W-2G, and Regulations section

the assets of the fund are treated as

of that governmental authority.

owned by the transferor of those assets

1.468B-2(l).

A fund is “ordered by” or “approved

until the fund also meets the

by” a governmental authority when the

governmental order and the segregation

Attachments

requirements. On the day the fund

authority issues its initial or preliminary

Attach schedules in alphabetical order

order to establish, or grants its initial or

meets all three requirements, the

and forms in numerical order to Form

transferor is treated as transferring the

preliminary approval of, the fund even if

1120-SF.

that order or approval may be subject to

assets to a qualified settlement fund.

Complete every applicable entry

review or revision. Generally, a

Relation-back rule.—If a fund meets

space on Form 1120-SF. Do not write

governmental authority’s order or

the resolve or satisfy requirement and

“See attached” instead of completing

approval has no retroactive effect and

the segregation requirement before it

the entry spaces. If you need more

does not permit a fund to be a qualified

meets the governmental order or

space on the forms or schedules, attach

settlement fund prior to the date the

approval requirement, the transferor and

separate sheets. Use the same size and

order is issued or the approval is

the administrator (defined above) may

format as the printed forms. Show the

granted. See, however, Relation-back

jointly elect the “relation-back election”

totals on the printed forms. Attach these

rule below.

(defined below) to treat the fund as

separate sheets after Form 1120-SF or,

Arbitration panels.—An arbitration

coming into existence as a qualified

if applicable, Schedule D (Form 1120).

settlement fund on the later of (a) the

award that orders the establishment of

Be sure to put the fund’s name and EIN

or approves a fund is an order or

date the fund meets the resolve or

on each sheet.

satisfy requirement and the segregation

approval of a governmental authority if:

requirement or (b) January 1 of the

The arbitration award is judicially

Definitions

calendar year in which all three

enforceable.

requirements are satisfied. If a

Administrator.—The term

The arbitration award is issued

relation-back election is made, the

“administrator,” which may include a

pursuant to a bona fide arbitration

assets held by the fund on the date the

trustee if the qualified settlement fund is

proceeding in accordance with rules

qualified settlement fund is treated as

a trust, is, in order of priority:

approved by a governmental authority

coming into existence are treated as

(such as self-regulatory organization-

1. The person designated or approved

transferred to the qualified settlement

administered arbitration proceedings in

by the governmental authority that

fund on that date.

the securities industry).

ordered or approved the fund.

Relation-back election.—Make the

The fund is subject to the continuing

2. The person designated in the

relation-back election by attaching a

jurisdiction of the arbitration panel, the

escrow agreement, settlement

copy of the election statement to Form

court of law that has jurisdiction to

agreement, or other similar agreement

1120-SF for the tax year in which the

enforce the arbitration award, or the

governing the fund.

qualified settlement fund is treated as

governmental authority that approved

3. The escrow agent, custodian, or

coming into existence. The statement

the rules of the arbitration proceedings.

other person in possession of the fund’s

must be signed by each transferor and

Resolve or satisfy requirement.—To

assets.

the administrator. File Form 1120-SF

meet this requirement, a fund must be

4. The transferor or, if there are

and the election statement by the due

established to resolve or satisfy one or

multiple transferors, all of the transferors

date of Form 1120-SF, including

more contested or uncontested claims

unless an agreement is signed by all of

extensions. The election statement must

that have resulted or may result from an

the transferors that designates a single

contain the following:

event (or a series of related events) that

transferor as the administrator.

1. The words “Regulations section

has occurred and that has given rise to

Transferor.—The term “transferor” is a

1.468B-1 Relation-back election” at the

at least one claim asserting liability:

person who transfers (or on whose

top of the first page.

Under the Comprehensive

behalf an insurer or other person

2. The name, address, and identifying

Environmental Response, Compensation

transfers) money or property to a

number of each transferor.

and Liability Act of 1980 (CERCLA), as

settlement fund to resolve or satisfy

3. The name, address, and employer

amended,

claims against that person.

identification number of the qualified

Arising out of a tort, breach of

Related person.—The term “related

settlement fund.

contract, or violation of law, or

person” is any person who is related to

4. The date on which the qualified

Designated by the Commissioner in a

the transferor within the meaning of

settlement fund is treated as coming

revenue ruling or revenue procedure.

section 267(b) or section 707(b)(1).

into existence.

Generally, a fund does not meet the

5. A schedule describing each asset

Qualified Settlement Fund

resolve or satisfy requirement if it is

treated as transferred to the fund on the

established to resolve or satisfy a liability

A fund, account, or trust (hereafter

date the fund is treated as coming into

to provide property or services unless

referred to as a fund) is a qualified

existence. The schedule of assets does

the transferor’s obligation to provide

settlement fund if it meets the

not have to identify the amount of cash

property or services is extinguished by a

governmental order or approval

or the property transferred by a

transfer or transfers to the fund. An

requirement, the resolve or satisfy

particular transferor.

exception exists for liabilities to provide

requirement, and the segregation

Qualified settlement fund treated as a

property or services if the liabilities are

requirement. These requirements are

corporation.—Except as otherwise

under CERCLA.

discussed below.

provided in Regulations section

Segregation requirement.—To meet

Governmental order or approval

1.468B-5(b), for purposes of subtitle F of

this requirement, the fund must (a) be a

requirement.—To meet this

the Internal Revenue Code, a qualified

trust under applicable state law or (b)

requirement, the fund must be

settlement fund is treated as a

keep its assets segregated from other

established pursuant to an order of, or

corporation and any tax imposed under

assets of the transferor (and related

must be approved by, the United States,

Regulations section 1.468B-2(a) is

persons). For example, cash held by a

Page 3

Instructions For Form 1120-Sf - (Rev. Sept. 1996) Page 3

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