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Form T-1 Trust Annual Report, New Final Ruling

Bonadio knows Labor Unions and we’re here to assist you in navigating the Internal Revenue Service and Department of Labor rulings and regulations that affect you. The Office of Labor-Management Standards (OLMS) ruling on March 6, 2020 requires another filing on the part of Labor Unions. On March 30, 2020, a correction notice was published. Below, we outline the requirements of who must file, and when filing must occur. This is not to be construed as legal advice. If anything in this memo pertains to you, you should contact your Bonadio Partner.

Labor organizations with total annual receipts of $250,000 or more are required to file the Form LM-2, Annual Report of Financial Information. If the labor organization files an LM-2, an assessment of the need to file a T-1 MUST be performed.

Who Must File: Labor organizations required to file Form LM-2, must assess the need to file a Form T-1 for each Section 3(I) trust, as defined by 29 U.S.C. § 402(l) of the LMRDA.

Section 3(I) trust, as defined by 29 U.S.C. § 402(l)of LMRDA, is a trust or other fund or organization (1) which was created or established by a labor organization, or one or more of the trustees or one or more members of the governing body of which is selected or appointed by a labor organization, and (2) a primary purpose of which is to provide benefits for the members of such labor organization or their beneficiaries.

If the trust meets the definition above and meets one or both of the structural descriptions below, a Form T-1 must be filed. The labor organization alone, or in combination with other labor organizations, either:

  • Appoints or selects a majority of the members of the trust’s governing board.
  • Contributes greater than 50% of the trust’s receipts during the one-year reporting period.

“Any employer contributions that are made to the trust pursuant to a collective bargaining agreement shall be considered the labor organization’s contributions.”

Exemptions: There are trusts for which a Form T-1 should NOT be filed:

  • Labor Unions that already file an annual financial disclosure report.
  • Entities expressly exempt from reporting under LMRDA (i.e., state or local central bodies of labor federations).
  • A subsidiary organization, as defined in Part X of Form LM-2 instructions.
  • An established Political Action Committee, if reports on said PAC is filed with a Federal or state agency.
  • An employee benefit plan subject to reporting under ERISA.
  • A federal employee health benefit.
  • A credit union subject to the Federal Credit Union Act, 12 U.S.C. 1751.

As a practical matter, a Form T-1 will only be filed for an Apprenticeship Trust.

Audits: An abbreviated Form T-1 can be filed if an annual audit of the trust has been performed in accordance with Generally Accepted Accounting Standards.

How to File: Filings must be submitted electronically through the OLMS Electronic Forms System (EFS). Forms will be available on EFS, July 1, 2021.

Effective Date: April 6, 2020. The first filing is due 90 days after the first fiscal year of the Labor organization’s fiscal year that begins on or after June 4, 2020. For example, a Labor organization with a December 31 year-end, will need to file their first Form T-1, if required, in March 2022.

Please don’t hesitate to contact us for assistance in preparing this new filing.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.