[Code of Federal Regulations]
[Title 26, Volume 7]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.501(c)(5)-1]

[Page 17-18]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.501(c)(5)-1  Labor, agricultural, and horticultural organizations.

    (a) The organizations contemplated by section 501(c)(5) as entitled 
to exemption from income taxation are those which:
    (1) Have no net earnings inuring to the benefit of any member, and
    (2) Have as their objects the betterment of the conditions of those 
engaged in such pursuits, the improvement of the grade of their 
products, and the development of a higher degree

[[Page 18]]

of efficiency in their respective occupations.
    (b)(1) General rule. An organization is not an organization 
described in section 501(c)(5) if the principal activity of the 
organization is to receive, hold, invest, disburse or otherwise manage 
funds associated with savings or investment plans or programs, including 
pension or other retirement savings plans or programs.
    (2) Exception. Paragraph (b)(1) of this section shall not apply to 
an organization which--
    (i) Is established and maintained by another labor organization 
described in section 501(c)(5) (determined without regard to this 
paragraph (b)(2));
    (ii) Is not directly or indirectly established or maintained in 
whole or in part by one or more--
    (A) Employers;
    (B) Governments or agencies or instrumentalities thereof; or
    (C) Government controlled entities;
    (iii) Is funded by membership dues from members of the labor 
organization described in this paragraph (b)(2) and earnings thereon; 
and
    (iv) Has not at any time after September 2, 1974 (the date of 
enactment of the Employee Retirement Income Security Act of 1974, Pub. 
L. 93-406, 88 Stat. 829) provided for, permitted or accepted employer 
contributions.
    (3) Example. The principles of this paragraph (b) are illustrated by 
the following example:

    Example. Trust A is organized in accordance with a collective 
bargaining agreement between labor union K and multiple employers. Trust 
A forms part of a plan that is established and maintained pursuant to 
the agreement and which covers employees of the signatory employers who 
are members of K. Representatives of both the employers and K serve as 
trustees. A receives contributions from the employers who are subject to 
the agreement. Retirement benefits paid to K's members as specified in 
the agreement are funded exclusively by the employers' contributions and 
accumulated earnings. A also provides information to union members about 
their retirement benefits and assists them with administrative tasks 
associated with the benefits. Most of A's activities are devoted to 
these functions. From time to time, A also participates in the 
renegotiation of the collective bargaining agreement. A's principal 
activity is to receive, hold, invest, disburse, or otherwise manage 
funds associated with a retirement savings plan. In addition, A does not 
satisfy all the requirements of the exception described in paragraph 
(b)(2) of this section. (For example, A accepts contributions from 
employers.) Therefore, A is not a labor organization described in 
section 501(c)(5).

    (c) Organizations described in section 501(c)(5) and otherwise 
exempt from tax under section 501(a) are taxable upon their unrelated 
business taxable income. See part II (section 511 and following), 
subchapter F, chapter 1 of the Code, and the regulations thereunder.

[T.D. 6500, 25 FR 11737, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as 
amended by T.D. 8726, 62 FR 40449, July 29, 1997]