Things You Need to Know About the New LM2

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Things You Need to Know About the New LM-2
Linda L. Jardine, CPA, Partner
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Major Changes Disbursements

• Several disbursement categories (4) were
  eliminated
• Office and Administrative
• Education and Publicity
• Professional Fees
• Other Disbursements
• Payments to officers and employees revised
• Schedules 9 and 10 now Schedules 11 and 12
• Functional reporting based on time

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New Functional Categories Schedules 15-19

• Representational Activities (15)
• Political Activities and Lobbying (16)
• Contributions, Gifts, and Grants (17)
• General Overhead (18)
• Union Administration (19)

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Previous Other Disbursement Categories Remain
Unchanged on New Form

• Benefits
• Per Capita Tax
• Strike Benefits
• Supplies for Resale
• Purchases of Investments and Fixed Assets
• Loans Made
• Repayments of Loans Obtained
• To Affiliates of Funds Collected on Their Behalf
• On Behalf of Individual Members
• Direct and Withheld Taxes

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Major Changes Disbursements and Other
Receipts

• Each of the 5 functional disbursement categories
  and other receipts require
• Itemized reporting for all individual items of
  5,000 or more
• Reporting amount of individual items to/from the
  same person or entity, which are less than
  5,000, that aggregate to 5,000 or more
• Aggregate reporting of all other disbursements in
  functional category less than 5,000 in total

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Itemization of Receipts / Disbursements

• Itemization only applies to
• 5 new functional disbursement categories
• Other receipts
• Excludes
• Items reported on Schedules 11 and 12
• Disbursements allocated to other disbursement
  categories
• Itemization is within a functional category
  (Schedules 15-19)
• All disbursements 5,000 or more to single entity
  or individual (vendor)
• 5 required fields to be completed

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Aggregation (Non-Itemization) of Other Receipts
and Disbursements by Vendor / Entity

• Within each functional category
• Sort by vendor, all payments
• Exclude items 5,000 or more (itemized
  individually)
• Remainder is total payments individually lt 5,000
• If total non-itemized payments aggregate 5,000
  or more per vendor, must be listed on
  itemization page (line I)
• Purpose and date not required to be reported
• Total amount of aggregated disbursements is
  reported

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Remaining Disbursements Within Each Functional
Category

• Itemization and aggregation within each
  functional category shows all payments to a
  particular vendor that are gt 5,000 for the year
• Within each functional category
• To calculate All Other disbursements for
  Summary Page, from total charges to functional
  category,
• exclude Itemized amounts
• exclude Aggregated amounts
• Remaining amount goes to detailed Summary Page as
  All Other Disbursements for this functional
  category

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Representational Activities includes

• Preparation for and participation in the
  negotiation of collective bargaining agreements
• Administration and enforcement of the agreements
• Efforts to become the exclusive bargaining
  representative for any unit of employees
• Keep from losing a unit in a decertification
  election or to another union
• Recruiting new members

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Representational Activities includes (contd)

• Examples of adequate descriptions
• Contract negotiation
• Grievance arbitration
• Litigation regarding the interpretation of a
  collective bargaining agreement
• Preparing organizing campaign pamphlets
• Staffing a help desk
• Opposition research
• Litigation regarding representation issues
• Litigation regarding a refusal to bargain

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Representational Activities includes (contd)

• Neither the name of the employer nor the specific
  bargaining unit that is the subject of the
  organizing activity need be identified in the
  description

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Political Activities and Lobbying includes

• Political disbursements or contributions in money
• Entities and individuals associated with dealing
  with the executive and legislative branches of
  the Federal, state, and local governments and
  with independent agencies and staffs to advance
  the passage or defeat of existing or potential
  laws or the promulgation or any other action with
  respect to rules or regulations (including
  litigation expenses)

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Political Activities and Lobbying includes
(contd)

• Political disbursements or contributions that are
  intended to influence the selection, nomination,
  election or appointment of anyone to a Federal,
  state, or local executive, legislative or
  judicial public office, or office in a political
  organization, or the election of Presidential or
  Vice Presidential electors and support for or
  opposition to ballot referenda.
• Disbursements for communications with members and
  their families for registration, get-out-the-vote
  and voter education campaigns

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Political Activities and Lobbying includes
(contd)

• Expenses of establishing, administering and
  soliciting contributions to union segregated
  political funds (or PACs)
• Disbursements to political organizations (527
  Funds) and other political disbursements
• Examples of adequate descriptions (5,000 or
  more)
• A registration drive
• Get-out-the-vote campaign
• Voter education campaign
• Fund raising
• Advocating or opposing legislation
• Advocating or opposing regulations

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Political Activities and Lobbying includes
(contd)

• The specific campaign, legislation, regulation,
  referendum, etc. should be identified whenever
  possible.
• Distinguish between activities in the United
  States and activities in foreign countries.

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Contributions, Gifts, and Grants includes

• Charitable contributions, contributions to
  scholarship funds
• Examples of adequate descriptions (5,000 or
  more)
• Medical research
• Community development
• Job retraining
• Education
• Disaster and relief assistance
• Athletic and youth sponsorships

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General Overhead includes

• Not allocable to any of the 16 other disbursement
  categories in Statement B.
• Purpose should include sufficient detail to
  determine why the disbursement cannot be
  allocated to another schedule.
• Examples
• Include support personnel at headquarters -
  building maintenance personnel and security
  guards
• The salary of an assistant, whenever possible,
  should be allocated at the same ratio as the
  person or persons to whom they provide support
  (Schedule 11 and 12)

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Union Administration includes

• Nomination and election of officers
• Unions regular membership meetings
• Intermediate, national and international meetings
• Union disciplinary procedures
• Administration of trusteeships
• Administration of apprenticeship and member
  education programs (not including political
  education which should be reported in Schedule
  16)
• Preparation of Forms LM-2 and T-1

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Union Administration includes (contd)

• Examples of adequate descriptions (5,000 or
  more)
• Printing of officer election ballots
• Rental of meeting facilities for a union
  convention
• Printing of transcripts of trusteeship hearing
• Purpose should be sufficient to explain why its
  not included in another schedule

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Exclusion of ConfidentialInformation
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Exclusion of Confidential Information

• Applies only to
• Schedule 14 Other Receipts
• Schedule 15 Representational Activities
• Schedule 19 Union Administration
• Union must be able to demonstrate disclosure
  would be adverse to its legitimate interests in
  confidentiality
• Covers items that are itemized and aggregated
  (non-itemized)

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Exclusion of Confidential Information (contd)

• Examples of excludable information
• Identity of individuals paid by union to work in
  non-union facility
• Cannot be union employees receiving more than
  10,000 report on Schedule 12
• Information related to
• Organizing strategy / campaign
• Would provide tactical advantage to parties union
  is/will be negotiating with
• Confidential settlement
• Disclosure could endanger health / safety of
  individual

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Exclusion of Confidential Information (contd)

• Instead of itemization/aggregation, include all
  confidential items in Line 5 of Detailed Summary
  Page (All Other Disbursements)
• No longer associated with a particular vendor
• Must be disclosed in Item 69, Additional
  Information
• Identify each schedule that excluded items(s) or
  aggregation(s)
• Exclude payee and amount information
• Identify general information omitted from each
  schedule (see examples above)

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Schedules 11 and 12

• Officers and Employees

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Schedules 11 and 12 (Old 9 and 10)

• Report all payments to officers and employees
• Now require allocation of time by the 5 new
  functional areas
• Applies to all officers and employees, including
  those under 10,000
• No time sheets required
• Good faith estimates to nearest 10
• Time allocation must equal 100
• Get statement from officer / employee to support
  percentages
• FAQ no particular records required

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Schedules 11 and 12 (Old 9 and 10) (contd)

• Total payments to an officer or employee in
  column H X allocation s are aggregated, then
  reported for all officers and all employees under
  functional categories in detailed summary page

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New Form T-1
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Trusts in Which a Labor Organization is Interested

• Labor unions must disclose certain information of
  a significant trust in which a labor organization
  is interested
• Information required to be disclosed is
• Total Assets
• Total Liabilities
• Total Receipts and Total Disbursements
• Itemized Receipts
• Itemized Disbursements
• Payments to Officers and Employees

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Definition Trust in Which a Labor Organization
is Interested

• Definition a trust or other fund or
  organization
• which was created or established by a labor
  organization, or one or more of the trustees or
  one or more members of the governing body of
  which is selected or appointed by a labor
  organization, and
• a primary purpose of which is to provide benefits
  for the members of such labor organization or
  their beneficiaries

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Definition Significant Trust

• Annual receipts of 250,000 or more during its
  most recent fiscal year, and
• The labor organizations financial contribution
  to trust is 10,000 or more
• Contribution is broadly construed

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Definition Financial Contribution by Labor
Organization

• Made directly by labor organization
• Made on behalf of labor organization
• Made pursuant to a CBA of which the union is a
  party
• Stock purchase, investment in
• In-kind
• FAQ includes amounts merely transmitted on
  behalf of members

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Examples of a Trust in Which a Labor Organization
is Interested

• Joint funds administered by a union and an
  employer pursuant to a CBA
• Educational or training institutions
• Banks or credit unions created for the benefit of
  union members
• Redevelopment or investment groups established by
  the union for the benefit of its members
• Building corporation (501(c)(2))

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Subsidiary Organization
Old Rule
New Rule

• Consolidate with union on LM-2 or file separate
• LM-2 form

• Can consolidate with union on LM-2
• or
• File Form T-1 if subsidiary organization meets
  definition of significant trust

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Trusts That are Not Significant

• If a trust has annual receipts of less than
  250,000 or the labor organizations financial
  contribution is less than 10,000 annually,
  report the existence of the trust and the amount
  of the contribution in Item 69 (old item 75) of
  your LM-2 form

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Form T-1 Not Required For

• Organizations that already file a Form LM-2, LM-3
  or LM-4
• Any entity expressly exempted from reporting in
  the Act
• Political Action Committees (PAC) Funds that file
  reports with Federal or State agencies or with
  the IRS (including 990s)
• 
  (contd)

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Form T-1 Not Required For (contd)

• Employee Benefit Plans that file a complete and
  timely annual report under ERISA
• Note Apprentice Plans that do not file Form 5500
  are still subject to the Form T-1 requirements
• Organizations that are not a significant trust

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