PRIA, Government Policy, Made Personal

Summary

A trust that qualifies under 501(c)(21) must pay a tax of 10 percent on any payment or expense that is not for the trust’s allowed purposes. The trustee must pay that tax from the trust’s assets. If a trustee agrees to make such a taxable payment knowing it is taxable, that trustee must pay a 2.5 percent tax on the amount, unless the trustee did not act intentionally and had a reasonable cause. If the bad payment is not fixed within the taxable period, the trust must pay an extra tax equal to 100 percent of the payment. Any trustee who refused to agree to the fix must pay an extra 50 percent. If more than one trustee is liable, they are all fully responsible. Definitions: “Taxable expenditure” — a payment not for the trust’s allowed purpose. “Correction” — getting the money back or having liable parties add funds so the trust is no worse off. “Taxable period” — from the payment date until either the IRS mails a notice of deficiency about that tax or the tax is assessed.

Title 26, §4952

Internal Revenue Code, Source: USLM XML via OLRC

(a)Tax imposed

(1)On the fund

There is hereby imposed on each taxable expenditure (as defined in subsection (d)) from the assets or income of a trust described in section 501(c)(21) a tax equal to 10 percent of the amount thereof. The tax imposed by this paragraph shall be paid by the trustee out of the assets of the trust.

(2)On the trustee

There is hereby imposed on the agreement of any trustee of such a trust to the making of an expenditure, knowing that it is a taxable expenditure, a tax equal to 2½ percent of the amount thereof, unless such agreement is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by the trustee who agreed to the making of the expenditure.

(b)Additional taxes

(1)On the fund

In any case in which an initial tax is imposed by subsection (a)(1) on a taxable expenditure and such expenditure is not corrected within the taxable period, there is hereby imposed a tax equal to 100 percent of the amount of the expenditure. The tax imposed by this paragraph shall be paid by the trustee out of the assets of the trust.

(2)On the trustee

In any case in which an additional tax is imposed by paragraph (1), if a trustee refused to agree to a part or all of the correction, there is hereby imposed a tax equal to 50 percent of the amount of the taxable expenditure. The tax imposed by this paragraph shall be paid by any trustee who refused to agree to part or all of the correction.

(c)Joint and several liability

For purposes of subsections (a) and (b), if more than one person is liable under subsection (a)(2) or (b)(2) with respect to the making of a taxable expenditure, all such persons shall be jointly and severally liable under such paragraph with respect to such expenditure.

(d)Taxable expenditure

For purposes of this section, the term “taxable expenditure” means any amount paid or incurred by a trust described in section 501(c)(21) other than for a purpose specified in such section.

(e)Definitions

(1)Correction

The terms “correction” and “correct” mean, with respect to any taxable expenditure, recovering part or all of the expenditure to the extent recovery is possible, and where full recovery is not possible, contributions by the person or persons whose liabilities for black lung benefit claims (as defined in section 192(e)) are to be paid out of the trust to the extent necessary to place the trust in a financial position not worse than that in which it would be if the taxable expenditure had not been made.

(2)Taxable period

The term “taxable period” means, with respect to any taxable expenditure, the period beginning with the date on which the taxable expenditure occurs and ending on the earlier of— (A)

(B)the date on which the tax imposed by subsection (a)(1) is assessed.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1980—Subsec. (b)(1). Pub. L. 96–596, § 2(a)(1)(I), substituted “taxable period” for “correction period”. Subsec. (e)(2). Pub. L. 96–596, § 2(a)(2)(G), substituted provision defining taxable period as the period beginning with the date on which the taxable expenditure occurs and ending on the earlier of the date of mailing a notice of deficiency with respect to the tax imposed by subsec. (a)(1) of this section under section 6212 of this title or the date on which the tax imposed by subsec. (a)(1) of this section is assessed for provision defining correction period as the period beginning with the date on which the taxable expenditure occurs and ending 90 days after the date of mailing a notice of deficiency under section 6212 of this title with respect to the tax imposed by subsec. (b)(1) of this section, extended by any period in which the deficiency cannot be assessed under section 6213(a) of this title and any other period which the Secretary determines reasonable and necessary to bring about the correction of the taxable expenditure.

Statutory Notes and Related Subsidiaries

Effective Date

of 1980 AmendmentFor

Effective Date

of amendment by Pub. L. 96–596 with respect to any first tier tax and to any second tier tax, see section 2(d) of Pub. L. 96–596, set out as an

Effective Date

note under section 4961 of this title.

§4952 Taxes on Taxable Expenditures

Summary

Title 26, §4952

Notes & Related Subsidiaries

Editorial Notes

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Effective Date

Citations & Metadata