Understanding Black Lung Trust Tax Reporting Made Simple
If you're involved with a black lung benefit trust—whether as a trustee, coal mine operator, or trust administrator—Form 990-BL might seem complex at first glance. This guide breaks down everything you need to know about the 2011 version of this specialized IRS form in plain English.

What the Form Is For

Form 990-BL serves as the annual reporting document for black lung benefit trusts established under Internal Revenue Code section 501(c)(21). These trusts are specifically created by coal mine operators to provide benefits to coal miners suffering from black lung disease (pneumoconiosis) and their families.

The form serves two primary purposes. First, it acts as an information return, documenting the trust's financial activities throughout the year—including contributions received, investment income, benefit payments made, and administrative expenses. Second, when applicable, it reports initial excise taxes imposed on the trust, trustees, or other parties who engage in prohibited transactions known as "self-dealing" or make "taxable expenditures."

Think of Form 990-BL as a comprehensive financial report card combined with a tax calculation worksheet. For trusts that normally receive gross receipts exceeding $50,000 annually, filing this form is mandatory. Smaller trusts with receipts of $50,000 or less must file an annual electronic notice (Form 990-N, also called the e-Postcard) instead.

When You’d Use It (Including Late and Amended Filings)

For the 2011 tax year, Form 990-BL must be filed by the 15th day of the 5th month following the close of the trust's tax year. For calendar-year trusts, this means a May 15, 2012 deadline. If your trust operates on a fiscal year basis, you'll calculate the deadline accordingly from your fiscal year-end.

If you cannot meet the filing deadline, you can request an automatic extension by filing Form 8868 (Application for Extension of Time to File an Exempt Organization Return). This extension gives you additional time but doesn't extend the time to pay any taxes owed—those must still be paid by the original deadline to avoid interest and penalties.

Late filings carry significant consequences. The IRS assesses a penalty of $20 per day for organizations (or $100 per day for "large organizations" with gross receipts exceeding $1 million) that file late, incorrectly, or incompletely. This penalty continues accumulating until the return is filed properly, up to a maximum of $10,000 ($50,000 for large organizations) or 5% of the organization's gross receipts, whichever is smaller.

If you discover errors after filing, you should file an amended return. While the 2011 instructions don't specifically detail amended return procedures, standard practice involves checking the "Amended Return" box (if available on the form) and clearly indicating which information has changed. Include explanations for all corrections.

Key Rules for 2011

Filing Threshold

The $50,000 gross receipts threshold determined whether a trust must file the full Form 990-BL or just the simpler e-Postcard. This threshold applies to trusts that "normally" have receipts at this level—meaning a consistent pattern, not just a single year.

Who Must File

The trustee must file Form 990-BL on behalf of the trust. However, in certain situations involving excise taxes, individual trustees or "disqualified persons" (defined later) may also need to file the form with Schedule A attached to report taxes they personally owe.

Self-Dealing Prohibitions

Section 4951 of the tax code strictly prohibits certain transactions between the trust and disqualified persons. These prohibited transactions include selling or leasing property to the trust, lending money to or from the trust, providing goods or services, paying excessive compensation, or transferring trust assets for personal benefit. Violations trigger a 10% excise tax on disqualified persons and a 2.5% tax on any trustee who knowingly participated.

Taxable Expenditures

Section 4952 imposes a 10% excise tax on the trust (paid from trust assets) for any expenditure not specifically authorized. Authorized purposes include paying black lung benefits, administrative expenses, insurance premiums, permitted benefits for retired miners and their families, permitted investments, contributions to the Federal Black Lung Disability Trust Fund, and returning excess contributions to the contributing coal operator. Trustees who knowingly agree to improper expenditures face a 2.5% personal tax.

Investment Restrictions

Black lung trusts can only invest in specific types of assets: public debt securities of the United States, state or local government obligations not in default, and time or demand deposits in banks or insured credit unions. Contributions to the trust must be in cash or these approved investment types.

Step-by-Step (High Level)

Step 1: Gather Your Financial Records

Compile complete records for the tax year including all contributions received from the coal mine operator, investment income (interest on approved securities and deposits), benefit payments made to miners and beneficiaries, insurance premiums paid, and all administrative expenses including trustee compensation.

Step 2: Complete the Identification Section

Enter the trust's name, address, and Employer Identification Number (EIN). Check the appropriate box indicating whether the trust, a trustee, or a disqualified person is filing. Note the fair market value of trust assets at the beginning of the operator's tax year (not the trust's tax year—this is an important distinction).

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

This section works like an income statement. Report contributions on line 1. Detail investment income on lines 2a through 2d. Calculate total revenue on line 3. Then list all expenses: contributions to the Federal Black Lung Disability Trust Fund, insurance premiums, benefit payments, trustee compensation, employee salaries, administrative expenses, and other allowable deductions. Line 12 shows your excess of revenue over expenses (or deficit).

Step 4: Complete Part II (Balance Sheets)

Prepare a beginning-of-year and end-of-year snapshot showing cash, savings accounts, investments in approved securities, office supplies and equipment, other assets, liabilities, and net assets. The balance sheet must balance—total assets must equal total liabilities plus net assets.

Step 5: Answer Part III (Questionnaire)

This critical section asks yes-or-no questions designed to identify potential self-dealing or taxable expenditures. Be thorough and honest. If you answer "Yes" to certain questions and cannot demonstrate the transaction was an excepted act, you'll need to complete Schedule A. Question 26 requires listing all officers, directors, and trustees along with their compensation—even if they received no compensation, list them and enter "-0-."

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

This section is confidential and not open to public inspection. List names and addresses of all persons who contributed $5,000 or more during the year (counting only individual contributions of $1,000 or more). Indicate whether the trust received any contributions exceeding the maximum allowable deduction under section 192.

Step 7: Prepare Schedule A if Necessary

If the trust, a trustee, or a disqualified person owes excise taxes under section 4951 (self-dealing) or section 4952 (taxable expenditures), you must complete and attach Schedule A. This schedule details each prohibited transaction and calculates the tax owed.

Step 8: Sign, Date, and File

The authorized trustee must sign the return under penalty of perjury. If a paid preparer completed the return, they must also sign and provide their PTIN (Preparer Tax Identification Number). Mail the completed form to: Internal Revenue Service, 201 W. River Center Blvd., Stop 31, TE/GE, Covington, KY 41011. Include payment for any taxes owed, made payable to "United States Treasury."

Common Mistakes and How to Avoid Them

Mistake #1: Missing the Filing Deadline

Many trustees forget that the deadline is the 15th day of the 5th month after year-end, not the standard April 15 date. Solution: Mark your calendar clearly, and if you need more time, file Form 8868 for an automatic extension before the deadline.

Mistake #2: Failing to Identify Self-Dealing

Some transactions may seem harmless but technically constitute prohibited self-dealing. For example, if a bank serving as trustee invests trust funds in its own certificates of deposit, this is considered lending money to a disqualified person. Solution: Review all transactions involving trustees, contributors, and their family members against the self-dealing definitions. When in doubt, consult a tax professional familiar with black lung trusts.

Mistake #3: Incomplete Trustee Information

Part III, Question 26 commonly contains errors—omitting trustees who received no compensation, failing to report non-cash benefits, or not describing time devoted to the position in numerical terms. Solution: List every trustee, director, and officer regardless of compensation. Use specific hours per week (like "5 hours/week") rather than vague phrases like "as needed." Include all forms of compensation: salaries, deferred compensation, expense reimbursements, and the value of benefits like personal use of trust-owned assets.

Mistake #4: Improper Investment Reporting

Some filers report investments in securities that don't meet the strict limitations of section 501(c)(21)(D). Solution: Verify that all investments fall into one of three categories: U.S. public debt securities, state/local government obligations not in default, or bank/credit union deposits. If the trust holds other investments, it may jeopardize its tax-exempt status.

Mistake #5: Confusing Trust vs. Operator Tax Years

The form asks for the fair market value of assets at the beginning of the operator's tax year, not the trust's tax year. If these differ, using the wrong date can cause confusion. Solution: Clearly identify both the trust's and the operator's tax years, and use the correct date for asset valuation.

Mistake #6: Neglecting Public Disclosure Requirements

Most of Form 990-BL (except Part IV and Schedule A filed by trustees/disqualified persons) is publicly available. Some organizations fail to make these documents available for inspection upon request. Solution: Establish procedures to respond to public inspection requests within the required timeframes. Keep copies readily accessible, and consider posting the return on your website to satisfy the "widely available" exception.

What Happens After You File

Once you mail Form 990-BL to the IRS Covington, Kentucky processing center, several things occur.

The IRS processes your return and stores the information in their database. Most of Form 990-BL becomes part of the public record—anyone can request copies through Form 4506-A or inspect your return at IRS offices. The exceptions are Part IV (contributor information) and Schedule A when filed by trustees or disqualified persons reporting their personal tax liabilities.

If you filed Schedule A with taxes due, the IRS posts your payment and may send you a confirmation. If you owe taxes but didn't pay, expect a notice demanding payment plus interest and potential penalties.

The IRS may select your return for examination. This doesn't necessarily mean you did something wrong—returns are selected through various methods including random sampling and computer screening for unusual items. If selected, an IRS agent will contact you requesting additional documentation to verify the information reported.

If the IRS identifies errors, omissions, or potential tax issues, you'll receive a notice. These range from simple math error corrections to proposed adjustments requiring formal response. Respond promptly to all IRS correspondence, providing requested information by the deadlines specified.

Your completed return also serves another purpose—demonstrating ongoing compliance with tax-exempt status requirements. The IRS monitors whether the trust operates exclusively for its exempt purpose and doesn't engage in prohibited activities. Patterns of self-dealing or taxable expenditures could trigger revocation of the trust's exempt status.

Remember that your filing obligation doesn't end with submission. You must make the return available for public inspection for three years from the filing deadline (or actual filing date if later). Store copies in an accessible location and establish procedures for handling inspection requests during regular business hours.

FAQs

Q1: What exactly is a "disqualified person" for purposes of self-dealing rules?

A disqualified person includes the coal mine operator who contributed to the trust, any trustee, anyone owning more than 10% of a contributing corporation or partnership, officers and directors of contributing entities, and family members (spouse, ancestors, lineal descendants) of these individuals. It also includes corporations, partnerships, or trusts where these persons collectively hold more than 35% ownership. The definition is intentionally broad to prevent even indirect self-dealing.

Q2: Can a trustee ever be paid for serving as trustee without triggering self-dealing taxes?

Yes. Payment of reasonable and necessary compensation to a trustee for carrying out the trust's exempt purposes is specifically exempted from the self-dealing rules, provided the compensation isn't excessive. The key is reasonableness—compare compensation to what would be paid to an unrelated third party for similar services. Document the basis for compensation decisions.

Q3: Our trust had gross receipts of $48,000 in 2010 and $52,000 in 2011. Which form do we file?

The filing requirement is based on whether the trust "normally" has gross receipts exceeding $50,000, not just a single year. With receipts hovering around the threshold in consecutive years, filing the full Form 990-BL is the safer choice for 2011 to ensure compliance. If your receipts consistently fall below $50,000 in subsequent years, you can transition to the e-Postcard.

Q4: We discovered after filing that we made an error calculating investment income. What should we do?

File an amended Form 990-BL as soon as possible. Clearly mark it as "Amended Return" and include an explanation of what changed and why. If the error resulted in underpaid taxes, include payment with the amended return to minimize interest charges. Promptly correcting errors demonstrates good faith and may help reduce penalties if the IRS later questions the original filing.

Q5: Are contributions to our black lung trust tax-deductible for the coal mine operator?

Yes, under section 192, coal mine operators can deduct contributions to qualified black lung trusts, subject to limitations based on the number of tons of coal mined and benefit liabilities. However, if contributions exceed these limitations, the operator may owe an excise tax under section 4953 and must file Form 6069. The trust should monitor whether received contributions exceed allowable amounts and report this on Part IV, line 2.

Q6: Our trust made a small payment that might technically be a taxable expenditure. Do we really need to file Schedule A and pay the 10% excise tax?

Yes, if the payment doesn't fit within the authorized categories. The tax code doesn't provide a de minimis exception for small amounts. However, you should carefully review whether the expenditure might qualify as an "administrative expense" or another permitted category. Consulting with a tax advisor before filing can help you properly characterize expenditures and potentially avoid unnecessary tax liability.

Q7: Can we file Form 990-BL electronically?

For the 2011 tax year, electronic filing of Form 990-BL was not yet mandatory, though it may have been available through certain IRS-approved software providers. Check with your tax software vendor or the IRS e-file website for current electronic filing options. Even if filing electronically, maintain complete paper copies for your records and public inspection requirements.

Note: This summary is based on 2011 IRS Form 990-BL instructions and guidance. Tax rules change periodically. Always consult current IRS publications and consider seeking professional tax advice for your specific situation.

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