Voglio sapere a riguardo di…

74362

Federal Register / Vol. 86, No. 248 / Thursday, December 30, 2021 / Rules and Regulations
officer and director payments, leases, and other financial transactions.6 This form provides the type of financial information that interested parties, such as union members, could use to monitor the use of trust funds in order to prevent circumvention or evasion of Title II
reporting obligations and to detect and deter fraud.
Additionally, the examples provided in the 2020 rule illustrate the redundancies. In particular, the 2020
rule cited examples of fraud involving apprenticeship and training plans and other ERISA-covered entities, all of which EBSA uncovered with its existing enforcement authority pursuant to ERISA. See 85 FR 1341920. The 2020
rule provided other examples and hypothetical situations as purportedly demonstrating the need for the Form T
1 to detect and deter fraudulent activity.
However, upon additional review, these examples do not demonstrate a need for the Form T1. For example, the 2020
rule offered a hypothetical example of a trust making a $15,000 payment to a printing company owned by a union official. In such a situation, the ownership of the printing company would not actually appear on the Form T1, but the 2020 rule postulated that members or the public would notice the connection. See 85 FR 1341819. It is just as likely, however, that union members or the public would already recognize this financial connection more directly via the IRS Form 990, Schedule L Transactions with Interested Persons.7 The Form 990
actually provides greater transparency in this regard than would the Form T
1, because Schedule L of the 990
directly relates to payments to interested parties, whereas the Form T
1 would rely on union members to make inferences and then conduct separate inquiries to establish union connections to the recipients of trust payments. This greater transparency on the Form 990
undercuts this rationale as a basis for supporting a Form T1 reporting requirement.
The 2020 rule reviewed Form LM2
reports from FY 17 and offered
khammond on DSKJM1Z7X2PROD with RULES

6 See
id. The Form 990 includes simplified filing options for smaller organizations that require less disclosure of financial information than their more detailed versions or the Form T1. The Form 990
N is for organizations with annual gross receipts that are normally $50,000 or less. However, the Form T1 does not have an assets schedule and a very small entity or an entity with less than $50,000
in gross receipts is unlikely to have transactions to itemize on the Form T1. Therefore, the Department has concluded that the marginal potential benefit gained from additional information about these smaller entities on a Form T1 does not justify the burden imposed by the Form T1.
7 See: https www.irs.gov/forms-pubs/aboutschedule-l-form-990.

VerDate Sep<11>2014

16:53 Dec 29, 2021

Jkt 256001

examples purportedly justifying the rule, but after careful consideration, the Department believes that such examples do not adequately support the rulemaking. See 85 FR 13419. For example, the 2020 rule cited a local union that made expenditures to a credit union. However, the 2020 rule exempted credit unions from the Form T1 reporting requirements because existing law already provides detailed transparency and oversight. The 2020
rule also mentioned a local union making payments to a trust that constitutes an information technology IT service corporation established by the local union to provide it with IT
services. But after further review, the local union reported on its Form LM2
that the trust already files the IRS Form 1065.8 Another example discussed payments from a union to a labor college; but the labor college files a Form 990, which provides the necessary transparency the Form T1 sought. After the rescission of the Form T1 provided for by this rule, the Department will continue to require unions to identify their trusts on the Form LM2 report, along with information that would enable the public to locate the Form 990
or other reports covering such trusts.
In sum, the Department does not identify any significant benefits derived from the Form T1, but, even if the 2020
rule provided some benefits that might be used by union members and the Department to prevent circumvention or evasion of Title II reporting obligations, the concrete, quantified burdens outweigh such marginal benefits. The following observations about the 2020
rules burdens support that conclusion and, thus, support rescission.
First, the 2020 rules failure to consistently apply exemptions increases the burdens associated with the rule without providing commensurate benefits. In particular, the 2020 rule did not adequately explain why the Form T1 exempted unions from submitting Form T1 reports covering trusts that already file the EBSA Form 5500 9 and certain IRS filings, such as those filed by 8 Like the Form 990 and Form 5500, the Form 1065 is an information return used to report the income, gains, losses, deductions, credits, and other information from the operation of a partnership. A
partnership does not pay tax on its income, but passes through any profits or losses to its partners.
Partners must include partnership items on their tax or information returns. https www.irs.gov/
forms-pubs/about-form-1065. The term partnership includes a limited partnership, syndicate, group, pool, joint venture, or other unincorporated organization, through or by which any business, financial operation, or venture is carried on.
9 See https www.dol.gov/agencies/ebsa/
employers-and-advisers/plan-administration-andcompliance/reporting-and-filing/form-5500.

PO 00000

Frm 00010

Fmt 4700

Sfmt 4700

political organizations under 26 U.S.C.
527, but not trusts that file the Form 990
with the IRS.
The 2020 rule focused on the unique nature of union financial reporting required under the LMRDA. The Department continues to hold that IRS
Form 990 reporting by labor organizations does not provide a substitute for Form LM2, LM3, and LM4 reporting by labor organizations, since the LM reports provide information tailored to the unique labormanagement purposes of the LMRDA.
See 68 FR 58375, 58395 2003.
However, the 2020 rule did not provide an adequate justification as to why such Form 990 reporting is not a sufficient substitute for Form T1 reporting. See 85 FR 1342526.
Commenters largely agreed with the Departments reasoning, set forth in the NPRM, that the inclusion of a Form 5500 exemption and a Form 990 nonexemption, was unexplained and unsupported. One commenter confirmed that a majority if not all of the trusts that will be reported under the rule are tax exempt entities that are required to file an annual Form 990
with the Internal Revenue Service. As the commenter explained, in the 2020
rule, the Department did not indicate what information was needed beyond what would be contained in the Form 990, and because there was no evidence of need beyond that information, any burden imposed by the rule is unwarranted.
The Department drew an arbitrary and unexplained line between Form 5500
and the Form 990. To be consistent, the Department should have also exempted Form 990 filers; however, such an exemption would encompass nearly the entire universe of Form T1 filers. Thus, if it had included a Form 990
exemption, the resulting Form T1
would then have failed to capture any reportable activity and the Form 990
would have captured that activityas it does without the rule. Such an underlying failure supports the withdrawal of this fundamentally flawed form.
Even when the Department used an existing form to create an exemption from the 2020 rule, the exemption was inconsistent with other Department policies. As one union commenter noted, the Form 5500 exemption failed to protect trusts from undue burdens, particularly apprenticeship and training plans. ERISA gives the Department the ability to exempt filers from the long Form 5500 when it is unnecessarily burdensome and costly, which EBSA
has done by allowing certain apprenticeship and training plans to file
E:FRFM30DER1.SGM

30DER1