1.501(c)(5)-1. Labor, agricultural, and horticultural
organizations
(a) The organizations contemplated by section 501(c)(5) as entitled
to exemption from income taxation are those which:
(1) Have no net earnings inuring to the benefit
of any member, and
(2) Have as their objects the betterment of
the conditions of those engaged in such pursuits, the improvement
of the grade of their products, and the development of a higher
degree of efficiency in their respective occupations.
(b)
(1) General rule. --An organization is not an
organization described in section 501(c)(5) if the principal
activity of the organization is to receive, hold, invest, disburse
or otherwise manage funds associated with savings or investment
plans or programs, including pension or other retirement savings
plans or programs.
(2) Exception. --Paragraph (b)(1) of this section
shall not apply to an organization which --
(i) Is established and maintained by another
labor organization described in section 501(c)(5), (determined
without regard to this paragraph (b)(2));
(ii) Is not directly or indirectly established
or maintained in whole or in part by one or more --
(A) Employers;
(B) Governments or agencies or instrumentalities
thereof; or
(C) Government controlled entities;
(iii) Is funded by membership dues from members
of the labor organization described in this paragraph (b)(2)
and earnings thereon; and
(iv) Has not at any time after September 2,
1974 (the date of enactment of the Employee Retirement Income
Security Act of 1974, Pub. L. 93-406, 88 Stat. 829) provided
for, permitted or accepted employer contributions.
(3) Example. --The principles of this pargraph
(b) are illustrated by the following example:
Example. Trust A is organized in accordance
with a collective bargaining agreement between labor union K
and multiple employers. Trust A forms part of a plan that is
established and maintained pursuant to the agreement and which
covers employees of the signatory employers who are members
of K. Representatives of both the employers and K serve as trustees.
A receives contributions from the employers who are subject
to the agreement. Retirement benefits paid to K's members as
specified in the agreement are funded exclusively by the employers'
contributions and accumulated earnings. A also provides information
to union members about their retirement benefits and assists
them with administrative tasks associated with the benefits.
Most of A's activities are devoted to these functions. From
time to time, A also participates in the renegotiation of the
collective bargaining agreement. A's principal activity is to
receive, hold, invest, disburse, or otherwise manage funds associated
with a retirement savings plan. In addition, A does not satisfy
all the requirements of the exception described in paragraph
(b)(2) of this section. (For example, A accepts contributions
from employers.) Therefore, A is not a labor organization described
in section 501(c)(5).
(c) Organizations described in section 501(c)(5)
and otherwise exempt from tax under section 501(a) are taxable
upon their unrelated business taxable income. See part II section
511 (and following), subchapter F, chapter 1 of the Code, and
the regulations thereunder. [Reg. §1.501(c)(5)-1.]
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