A tax-exempt electric utility is purchasing electric and natural gas distribution systems from another "utility."  All new electric and natural gas customers will be given full voting member status in the co-op and separate allocation units will be created for electric energy and natural gas distribution operations.

IRS has issued a letter ruling stating that the purchase and operation of the natural gas distribution system is a "like organization" activity contemplated under I.R. Code sec. 501(c)(12)(A).  IRS also said that creating the separate allocation units is acceptable and that the co-op may aggregate all approved "like organization" activities when measuring compliance with the 85-percent member income test prescribed by sec. 501(c)(12)(A).

The full text of the determination, PLR 200849016 (dated Sept. 11, 2008; released Dec. 5, 2008), is posted at http://www.irs.gov/pub/irs-wd/0849016.pdf.  NSAC thanks Teree Castanias of KPMG for calling this ruling to our attention.