501(c)(21) -- Black Lung Benefit Trusts

If your organization wishes to obtain recognition of exemption as a black lung benefit trust, it must file its application by letter and include a copy of its trust instrument. The general procedures to follow for obtaining recognition are discussed in chapter 1 of this publication. This section describes the additional (or specific) information to be provided upon application.

Requirements. A black lung benefit trust that is established in writing, created or organized in the United States, and contributed to by any person (except an insurance company) will qualify for tax-exempt status if it meets both of the following requirements.

1. Its only purpose is:
1. To satisfy in whole or in part the liability of that person (generally, the coal mine operator contributing to the trust) for, or with respect to, claims for compensation arising under federal or state statutes for disability or death due to pneumoconiosis,
2. To pay the premiums for insurance that covers only that liability, and
3. To pay the administrative and other incidental expenses of that trust (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the trust and processing of black lung claims against such person arising under federal or state statutes.
2. No part of its assets may be used for, or diverted to, any purposes other than:
1. The purposes described in (1), above,
2. Payments into the Black Lung Disability Trust Fund or into the general fund of the U.S. Treasury (other than in satisfaction of any tax or other civil or criminal liability of the person who established or contributed to the trust),
3. Investment in public debt securities of the U.S., obligations of a state or local government that are not in default as to principal or interest, or time or demand deposits in a bank or an insured credit union located in the U.S. (These investments are restricted to the extent that the trustee determines that a portion of the assets is not currently needed for the purposes described in (1), above), or
4. Accident and health benefits or insurance premiums and other administrative expenses for retired coal miners and their spouses. The amount of assets available for such use is generally limited to 110% of the present value of the liability for black lung benefits.

An annual information return is required of exempt trusts described in section 501(c)(21). Form 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons, must be used for this purpose. However, a trust that normally has gross receipts in each tax year of not more than $25,000 is excepted from this filing requirement.

Excise taxes. If your organization makes any expenditures, payments, or investments other than those described earlier in this section, a tax equal to 10% of the amount of such expenditures is imposed on the trust. If there are any acts of self-dealing between the trust and a disqualified person, a tax equal to 10% of the amount involved is imposed on the disqualified person. Both of these excise taxes are reported on Schedule A (Form 990-BL). See the Form 990-BL instructions for more information on these taxes and what has to be filed, even if the trust is excepted from filing.

Tax treatment of donations. Contributions by a taxpayer (generally, the coal mine operator) to a black lung benefit trust are deductible for federal income tax purposes under section 192 of the Code. The deduction is limited, and any excess contributions are subject to an excise tax of 5%. Form 6069, Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction, is used to compute the allowable deduction and any excise tax liability. The form does not have to be filed if there is no excise tax liability. For more information about these contributions, see Form 6069 and its instructions.

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