Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons

If you manage a black lung benefit trust or work for a coal mine operator that established one, Form 990-BL might seem complicated at first glance. This guide breaks down what you need to know about this specialized IRS form for the 2012 tax year, using plain language and practical examples. IRS.gov

What the Form Is For

Form 990-BL serves two main purposes for black lung benefit trusts—specialized funds that coal mine operators establish to pay benefits to miners who develop black lung disease (pneumoconiosis) from coal dust exposure.

First, it's an annual information return that reports the trust's financial activities to the IRS, much like how individuals file tax returns. These trusts are tax-exempt organizations under Internal Revenue Code section 501(c)(21), and the IRS needs to verify they're operating properly. The form shows how much money came into the trust, what expenses were paid, and the trust's financial position at year-end.

Second, if problems occurred during the year, Form 990-BL becomes a tax return for excise taxes. These special taxes apply when trusts, trustees, or certain related parties (called "disqualified persons") engage in prohibited transactions like self-dealing or make expenditures for purposes outside the trust's narrow mission. Instructions for Form 990-BL

Think of it this way: the form is like a report card that shows the IRS the trust followed the rules Congress established when it created these special trusts under the Black Lung Benefits Revenue Act of 1977.

When You’d Use It (Filing Requirements, Late Returns, and Amended Returns)

Regular filing requirements: A black lung benefit trust must file Form 990-BL annually unless it qualifies for an exception. Trusts that normally receive gross receipts of $50,000 or less each year can file the simpler Form 990-N electronic notice instead. However, if the trust owes excise taxes under sections 4951 or 4952, it must file Form 990-BL regardless of its size.

The form is due on the 15th day of the 5th month following the close of the trust's tax year. For calendar-year trusts, that means May 15, 2013 for the 2012 tax year. If that date falls on a weekend or holiday, the deadline moves to the next business day.

Filing location: Mail the completed form to Internal Revenue Service, 201 W. River Center Blvd., Stop 31, TE/GE, Covington, KY 41011.

Extensions: If you need more time, file Form 8868 (Application for Extension of Time to File an Exempt Organization Return) before the original due date. This can give you additional months to prepare the return.

Late returns: Filing late triggers penalties of $20 per day (or $100 per day for large organizations with gross receipts exceeding $1 million) up to a maximum of $10,000 ($50,000 for large organizations) or 5% of gross receipts, whichever is smaller. The IRS can also issue a written demand for the return, which adds $10 per day in penalties with a $5,000 cap if you don't comply.

Amended returns: If you discover errors after filing, prepare a corrected Form 990-BL and check the "Amended Return" box at the top. Include an explanation of what changed and why.

Special filing situations: Trustees and disqualified persons who owe excise taxes also file Form 990-BL with Schedule A attached, even if the trust itself doesn't need to file. If you're only filing to report personal excise tax liability, complete the identification area, Schedule A, and signature section. IRS Publication 557

Key Rules That Apply Specifically to 2012

For the 2012 tax year, Form 990-BL operated under instructions revised in December 2011. Several important rules governed what trusts could and couldn't do:

Permitted Trust Purposes

The trust could only use its money for these specific purposes: (1) paying black lung benefits to eligible miners; (2) purchasing insurance covering black lung liabilities; (3) paying administrative expenses directly related to trust operations; (4) providing health benefits for retired miners and their families; (5) investing excess funds in approved investments; or (6) making payments to the Federal Black Lung Disability Trust Fund.

Investment Restrictions

Trusts could only invest amounts exceeding current-year obligations, and only in these "safe" investments: U.S. Treasury securities, state or local government bonds not in default, or FDIC-insured bank accounts and credit union deposits. Stocks, real estate, or other speculative investments were prohibited.

Excise Tax Triggers

Two main violations triggered excise taxes in 2012. "Self-dealing" (section 4951) occurred when trustees or disqualified persons engaged in certain transactions with the trust—like selling property to the trust, lending money, or receiving excessive compensation. "Taxable expenditures" (section 4952) happened when the trust spent money on anything outside its permitted purposes. Initial taxes were 10% of the amount involved for the trust or self-dealer, and 2.5% for trustees who knowingly participated. If not corrected quickly, these could escalate to 100% and 50% taxes respectively.

Public Inspection Requirements

Most of Form 990-BL became public record, meaning anyone could request to see it. However, Part IV (listing contributors) and Schedule A (reporting excise taxes) remained confidential to protect privacy.

Reporting Threshold for Contributors

The trust had to list any person who contributed $5,000 or more during the year in Part IV, though this information wasn't publicly disclosed.

These rules existed to ensure trusts served their intended purpose—helping disabled coal miners—rather than becoming financial vehicles for other purposes. Black Lung Benefit Trusts Audit Guide

Step-by-Step (High Level)

Step 1: Gather your records

Before starting, collect bank statements, investment records, receipts for benefit payments, insurance policies, contributor information, trustee compensation records, and documentation of all trust expenditures for 2012.

Step 2: Complete the heading

Enter the trust's name, address, and employer identification number (EIN). Indicate whether you're filing as the trust, a trustee with tax liability, or a disqualified person. Check boxes if this is an amended return, the trust is claiming exempt status while an application is pending, or the address changed. Enter the fair market value of trust assets at the beginning of the operator's tax year.

Step 3: Fill out Part I (Analysis of Revenue and Expenses)

Report contributions from the coal mine operator (line 1), investment income like interest and dividends (line 2), and total revenue (line 3). Then detail expenses: payments to the Federal Black Lung Trust Fund (line 4), insurance premiums (line 5), direct benefit payments (line 6), trustee compensation (line 7), other salaries (line 8), administrative costs (line 9), and other deductions (line 10). Calculate total expenses (line 11) and excess/deficit (line 12).

Step 4: Complete Part II (Balance Sheets)

This two-column section shows the trust's financial position at the beginning and end of 2012. List assets like cash, savings accounts, U.S. government securities, and state/local bonds (lines 13-17). Total these on line 18. Then show liabilities like approved claims payable (line 19) and the trust's capital/fund balance (line 20). Lines 19 and 20 must equal line 18 for both columns.

Step 5: Answer Part III (Questionnaire)

These yes/no questions help the IRS identify potential problems. Questions cover whether the trust maintained required exemption documentation, engaged in any prohibited transactions, made improper investments, or had any unreported excise tax issues from prior years. Detailed questions about trustees, disqualified persons, and compensation appear on line 26, which requires listing all officers and trustees even if unpaid.

Step 6: Complete Part IV (Statement With Respect to Contributors)

This confidential section lists contributors who gave $5,000 or more. Note if the trust received excess contributions that might trigger the 5% excise tax under section 4953.

Step 7: Attach Schedule A if necessary

If you answered "Yes" to questions indicating self-dealing (section 4951) or taxable expenditures (section 4952), you must complete Schedule A. This form calculates the excise taxes owed, identifies who owes them, and provides details about each prohibited transaction.

Step 8: Sign and file

An authorized trustee must sign under penalties of perjury. If a paid preparer helped, they must also sign and provide their identification number. Mail the completed form to the Covington, Kentucky address by the deadline. Form 990-BL Instructions

Common Mistakes and How to Avoid Them

Mistake 1: Reporting contributions wrong

Some filers incorrectly include amounts that aren't valid contributions. The trust can only accept cash or property it's permitted to invest in (Treasury securities, municipal bonds, or bank deposits). A contribution of stock or real estate isn't valid and creates problems. Fix: Review what the operator contributed and verify each contribution meets the allowed property types.

Mistake 2: Failing to recognize self-dealing

Many trustees don't realize common transactions constitute self-dealing. For example, if the trust deposits money in a bank where a trustee works as an officer, that's technically self-dealing (though there are exceptions for certain banking relationships). Fix: Carefully review the definition of "disqualified person" and "self-dealing" in the instructions. When in doubt, consult a tax professional before the transaction occurs.

Mistake 3: Making prohibited investments

Trusts sometimes invest in mutual funds, stocks, or corporate bonds—all prohibited investments. Fix: Work with a bank or investment advisor familiar with black lung trust requirements. Only invest in the three permitted categories: U.S. government securities, non-defaulted state/local government bonds, or insured bank/credit union deposits.

Mistake 4: Paying for unauthorized expenses

Administrative costs are allowed, but they must directly relate to trust operations and claim processing. Paying for legal services unrelated to trust business or donating to charities creates taxable expenditures. Fix: Before approving any expenditure, ask: "Does this serve one of the six permitted purposes listed in section 501(c)(21)?" If no, don't pay it from trust funds.

Mistake 5: Missing the filing deadline

Late filing triggers automatic penalties that can't be waived without proving reasonable cause. Fix: Set calendar reminders for at least 60 days before the deadline. If you can't make it, file Form 8868 for an extension before the original due date.

Mistake 6: Incomplete Part III questionnaire

Leaving questions unanswered or providing vague responses raises red flags. Fix: Answer every question completely. If you answer "Yes" to questions about potential problems, attach detailed explanations rather than hoping the IRS won't notice.

Mistake 7: Forgetting Schedule A when required

If excise taxes apply, filing without Schedule A means the return is incomplete. Fix: Review Part III answers carefully. Any "Yes" answer indicating self-dealing or taxable expenditures requires Schedule A—no exceptions.

What Happens After You File

IRS processing: Once the IRS receives Form 990-BL, it enters the Ogden, Utah processing center system. The return is scanned and reviewed for mathematical accuracy and completeness. Most returns are processed within a few weeks, though complex returns or those with excise taxes may take longer.

Public disclosure: Approximately three months after filing, your return (except Part IV and Schedule A) becomes available for public inspection on IRS databases. Anyone can request a copy from either the IRS or directly from your trust.

Payment of excise taxes: If Schedule A reports excise taxes owed, include payment with the return. Make checks payable to "United States Treasury" and write the trust's EIN and "Form 990-BL" on the check. Separate payments are required if multiple parties owe taxes for the same violation (the trust, trustees, and disqualified persons each file their own return).

Future obligations: Filing Form 990-BL for 2012 doesn't end your responsibilities. The trust must file annually as long as it exists and meets the filing requirements. Keep copies of filed returns for at least three years, though seven years is better practice.

Potential examinations: The IRS may select your return for audit, particularly if unusual items appear or if questions weren't fully answered. Black lung trusts can be audited as part of the coal mine operator's income tax examination or independently by the IRS Exempt Organizations division. During an examination, the IRS will verify the trust meets exemption requirements, investments are proper, and no unreported excise taxes exist.

Revocation risk: If serious violations occur—like consistently making taxable expenditures, investing in prohibited assets, or failing to restrict trust purposes properly in the trust document—the IRS can revoke the trust's tax-exempt status. This creates significant tax consequences for both the trust and the coal mine operator.

State filings: Some states require copies of Form 990-BL for state-level reporting. Check your state's requirements separately. IRS Examination Guidelines

FAQs

1. What exactly is a "black lung benefit trust" and who can establish one?

A black lung benefit trust is a special tax-exempt fund created by a coal mine operator to pay benefits to miners who develop pneumoconiosis (black lung disease) from coal dust exposure during employment. Only coal mine operators can establish these trusts under section 501(c)(21). The trust provides a tax-advantaged way to fund the operator's liability for medical expenses, compensation payments, and related benefits required under the Federal Black Lung Benefit Act. Insurance companies cannot establish these trusts because their liabilities arise from contractual obligations rather than mine operations.

2. Our trust received only $30,000 in gross receipts for 2012. Do we still need to file Form 990-BL?

Probably not. Trusts that normally receive $50,000 or less in gross receipts can file Form 990-N (the "e-Postcard") instead, which is much simpler. However, there are two important exceptions: (1) If your trust owes any excise taxes under sections 4951 or 4952, you must file Form 990-BL regardless of size; (2) If you voluntarily choose to file Form 990-BL instead of Form 990-N, you can do so. To determine if receipts are "normally" $50,000 or less, average the last three years' gross receipts. For newer trusts, special rules apply based on years in existence.

3. What makes someone a "disqualified person" for self-dealing purposes?

A disqualified person is anyone with a close relationship to the trust or the coal mine operator who contributes to it. This includes: the contributor (mine operator), all trustees, anyone owning more than 10% of the contributing company, officers/directors/employees of the contributor, and family members (spouse, ancestors, lineal descendants) of these individuals. It also extends to corporations, partnerships, or trusts where these individuals collectively own more than 35%. For example, if a trustee's daughter owns a medical supply company, the trust generally shouldn't purchase supplies from that company—it would be self-dealing even if the prices are fair.

4. We paid one trustee $75,000 in 2012 for managing the trust full-time. Is this a problem?

Not necessarily. Paying reasonable compensation to trustees for services necessary to carry out the trust's exempt purpose is specifically allowed and doesn't constitute self-dealing. The key word is "reasonable"—the compensation must be comparable to what you'd pay an unrelated person for the same services. Excessive compensation, however, creates two problems: the excess is self-dealing subject to 10% excise tax, and it's a taxable expenditure subject to another 10% tax. Document why the compensation is reasonable (perhaps with a compensation study comparing similar positions) and keep evidence of the trustee's time and duties.

5. What happens if we discover we made a prohibited transaction last year?

First, don't panic—but do act quickly. The transaction needs to be "corrected" to avoid escalating taxes. Correction means undoing the transaction as much as possible and placing the trust in the financial position it would've been in if the transaction hadn't occurred. For example, if the trust bought property from a disqualified person, correction might involve selling it back (possibly at a loss to the disqualified person if values changed). Even after correcting, you'll still owe the initial 10% tax, but you'll avoid the 100% tax imposed on uncorrected violations. File amended returns reporting the transaction and taxes for all affected years. Consider consulting a tax attorney who specializes in exempt organizations.

6. Can our trust invest in a mutual fund that only holds government securities?

No. The law is very specific: trusts can invest only in actual U.S. government securities, state/local government bonds, or bank deposits—not in mutual funds, even if those funds invest exclusively in permitted assets. This strict rule exists because mutual funds themselves are corporate entities, and the trust can only deal directly with government entities or insured financial institutions. If you want diversification among government securities, you'll need to purchase individual Treasury bonds, notes, or bills with different maturity dates rather than using a mutual fund.

7. Our coal mine operator went bankrupt. What happens to the trust?

The trust continues to exist as a separate legal entity even if the operator that established it goes out of business or declares bankruptcy. The trust's obligations to pay benefits remain, funded by whatever assets it holds. However, no new contributions will come in from the defunct operator. The trust should continue filing Form 990-BL annually as long as it has assets and operations. Eventually, if all benefits are paid and assets depleted, the trust can be terminated. Any remaining assets might need to be paid to the Federal Black Lung Disability Trust Fund or the U.S. Treasury. Consult both a tax advisor and an attorney specializing in bankruptcy law if this situation arises, as it involves complex legal issues beyond just tax compliance.

Resources

About Form 990-BL - IRS.gov
Instructions for Form 990-BL (2011 revision, used for 2012) - IRS.gov
Black Lung Benefit Trusts Audit Technique Guide - IRS.gov
Publication 557 - Tax-Exempt Status for Your Organization - IRS.gov

This guide provides general information for the 2012 tax year. For specific situations, consult a tax professional familiar with black lung benefit trusts. Tax laws and IRS procedures may have changed since 2012.

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