part7-73
- 7.25.22.1
Statute - 7.25.22.2
Liability of Coal Mine Operators - 7.25.22.3
Requirements for Exemption - 7.25.22.4
Chapter 42 Excise Taxes - 7.25.22.5
Liability of Employers Other than Coal Mine Operators - 7.25.22.6
Permitted Activities - 7.25.22.7
Applications for Exemption - 7.25.22.8
Returns Form 990–BL
-
IRC 501(c)(21) (P.L. 95–488), added by the
Black Lung Benefits Revenue Act of 1977 provides tax exemption to qualifying
black lung benefit trusts created and funded by coal mine operators to provide
miners with benefits to cover disability or death from black lung disease.
-
The Federal Coal Mine and Safety Act of 1969 (P.L.
91–173) established a requirement that operators of coal mines pay benefits
to miners that have contracted black lung disease. -
An operator could satisfy its liability through
the purchase of insurance or by qualifying as a self-insurer.
-
Before the enactment of P.L. 95–488, the
law provided for a current deduction for actual benefit claims approved or
filed during the year. -
With enactment, the above provision was amended
to allow for current tax deductions to be taken by coal mine operators for
funds permanently set aside in a trust described in IRC 501(c)(21) to pay
black lung benefits. -
These contributions cannot exceed the amount necessary to fund, on a
sound actuarial basis, the operator’s remaining unfunded liability for
claims expected to be filed.
-
To qualify under IRC 501(c)(21) a trust must be
created or organized in the United States and established pursuant to a written
instrument. The trust’s terms must provide that no part of its assets
may be used for, or diverted to, any purpose not specified in IRC 501(c)(21)(A).
-
A trust must also be irrevocable, without any
right or possibility of reversion of the corpus or income to the coal mine
operator or other creator liable for the payment of black lung benefits, except
that the creator may recover excess contributions.
-
The Black Lung Benefits Revenue Act imposes excise
taxes on certain acts of self-dealing (IRC 4951) and taxable expenditures
(IRC 4952). These excise taxes are similar to those imposed on private foundations
for self-dealing and taxable expenditures. Thus, the regulations under IRC
4941, 4945 and 4946 generally apply to IRC 4951 and 4952. The excise tax on
self-dealing also applies to the Nuclear Decommissioning Trusts.
-
In addition to coal mine operators, the Black
Lung Benefits Revenue Act established liability on coal mine construction
and transportation employers for workers exposed to coal dust. Such an employer
may be able to establish a trust in the same way as would a coal mine operator.
-
Employers liable under state law for claims for
black lung disability or death benefits may also establish a trust under IRC
501(c)(21). For example, worker’s compensation laws may impose this
liability; however, liability arising under a state statute must be for, or
with respect to, a claim for compensation for death or disability due to black
lung disease. Black lung disease is defined as a chronic dust disease of the
lung arising out of coal mine employment.
-
A coal mine operator may establish a trust to
pay all or part of the operator’s liability. The trust may pay the benefits
directly to the beneficiaries or purchase insurance exclusively covering liability
for black lung benefits.
-
Administrative and incidental costs of the trust
may be paid out of its assets. Such costs may include any excise tax imposed
on a taxable expenditure and reasonable expenses arising in connection with
a claim against the trust for liability as a taxable expenditure.
-
Excise taxes imposed on the trustee or other disqualified
person for acts of self-dealing or making excess contributions cannot be covered
by the trust.
-
However, a trust may purchase insurance covering
the liability of a trustee for excise taxes to the extent that the cost of
the insurance together with any other compensation to the trustee is reasonable.
A trust may also indemnify a trustee for reasonable expenses arising from
a successful defense in an administrative proceeding involving excise taxes.
This indemnification is also subject to reasonable compensation limitations.
-
A trust may invest its assets but only to the
extent that they exceed current year obligations. These investments must be
limited to public debt securities of the United States (obligations guaranteed
as to principal and interest by the United States), obligations of a state
or local government which are not in default as to principal and interest,
or time-demand deposits in a bank or an insured credit union in the United
States.
-
If a bank or credit union is a trustee of the
trust or a disqualified person, deposits or investments in that bank or credit
union would constitute an act of self-dealing under IRC 4951. This differs
from the private foundation area, in which Reg. 53.4941(d)—2(c)(4) would
allow private foundations to invest its assets in a bank that was a disqualified
person.
-
A trust seeking recognition of exemption from
federal income tax under IRC 501(c)(21) should write to the Internal Revenue
Service, Attn: Exempt Organizations Determinations, 550 Main Street, Cincinnati,
OH 45202. -
No specific application form is required. However, a letter should be
submitted requesting a ruling on exempt status along with a copy of the trust
instrument.
-
A tax-exempt black lung benefit trust described
in IRC 501(c)(21) must file an annual information return, Form 990–BL,
unless its normal annual gross receipts are not more than $25,000.
-
Schedule A of Form 990–BL must be filed
to report any initial excise taxes imposed under IRC 4951 or 4952.-
A trust required to file a return and liable for
tax under IRC 4952 must attach a completed Schedule A to a completed Form
990–BL. -
A trust liable for tax under IRC 4952, but not otherwise
required to file an annual information return, must attach a completed Schedule
A to Form 990–BL, in which only the identification and signature areas
are to be completed. -
A trustee or disqualified person liable for tax
under IRC 4951 or 4952 must attach a completed Schedule A to a Form 990–BL,
in which only the heading (omitting check boxes for application pending, address
change and FMV of assets) and signature areas are to be completed.
-
-
Schedule A is not required if no taxes are due
under IRC 4951 or 4952.
-
The approved application and Forms 990–BL
filed by black lung benefit trusts are subject to the public inspection requirements
of IRC 6104. However, Part IV of Form 990–BL, identification of contributors,
and Schedule A are not open for inspection. -
Form 990–BL and Schedule A filed by a trustee
or disqualified person are not open for public inspection.
