Rev. Rul. 62-54

Advice has been requested whether the trustee of a supplemental unemployment benefit trust or the employer who contributes the funds to the trust should file information returns where a payment of $600 or more or payments aggregating $600 or more are made in one year from the trust to any one individual.

Pursuant to a collective bargaining agreement between a labor union and an employer, a supplemental unemployment benefit plan was created requiring the establishment of a trust fund to provide payments to union members who, during temporary lay-off periods, become eligible to receive benefits from the fund.

The union and the employing company entered into a formal trust agreement providing for the creation of a trust fund to be administered by an independent trustee. The fund is established and maintained by contributions from the company based upon the number of man-hours of work performed over specified periods by union employees covered under the plan. In the event an employee becomes eligible for benefits, usually because of temporary lay-off, he receives stipulated payments from the fund in accordance with a schedule incorporated in the trust agreement. The trust fund must be held in cash or invested only in obligations of the United States Government. The plan provides that under no circumstances shall any of the trust fund revert to, or be used for, the benefit of the company.

The plan is similar to the one described in detail in Revenue Ruling 56-249, C.B. 1956-1, 488, in that no employee has any right, title, or interest in or to any of the assets of the fund or in or to any company contributions thereto until such time as he is qualified and eligible to receive a benefit therefrom. In Revenue Ruling 56-249, it was held that benefits paid to individuals by trustees of a trust fund created pursuant to the plan discussed therein do not constitute `wages' for purposes of the taxes imposed by the Federal Unemployment Tax Act and the Federal Insurance Contributions Act, or for purposes of the Collection of Income Tax at Source on Wages (chapters 23, 21, and 24, respectively, subtitle C, Internal Revenue Code of 1954). However, it was also held that such payments are neverthless includible in the gross incomes of such individuals for the year in which received.

Section 6041 of the Code provides that all persons engaged in a trade or business and making payment, in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income of $600 or more in any taxable year shall render a true and accurate return to the Secretary of the Treasury or his delegate, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary of his delegate.

Section 1.6041-1 of the Income Tax Regulations provides, in part, that every person engaged in a trade or business shall make an information return for the calendar year with respect to payments made during such year in the course of trade or business to another person of fixed or determinable income of $600 or more. The return required shall be made on Form 1099, U.S. Information Return For Calendar Year _ _ , and Form 1096, U.S. Annual Information Return, except that the return with respect to distributions to beneficiaries of a trust or of an estate shall be made on Form 1041, U.S. Fiduciary Income Tax Return.

The payments here in question are not made by the employer. He makes his required contributions to the trust fund and the trustee thereof makes the necessary payments to eligible persons covered under the plan. Therefore, the employer is not required to file an information return with respect to payments made by the trust.

The payments are not being made by a trust, as contemplated by section 641 of the Code, to a beneficiary who includes those payments in his gross income under section 662, nor are the payments considered `wages' for purposes of the collection of income tax at source on wages. However, as specified in Revenue Ruling 56-249, the payments are includible in the gross income of the individual in the year in which received.

Accordingly, it is held that if a payment of $600 or more or payments aggregating $600 or more are made in one year to an individual pursuant to the above plan or a plan substantially similar to the one considered in Revenue Ruling 56-249, then the trustee of the trust under such plan should file an annual information return on Form 1096, accompanied by a statement on Form 1099 for each such individual. Payments made by an employer or a person other than the trustee of the fund should not be considered in determining whether the $600 minimum has been paid by the trustee.

A similar holding is contained in Revenue Ruling 57-383, C.B. 1957-2, 44, with respect to a fund established by a labor union through employee contributions. Revenue Ruling 57-383 is modified to the extent it infers that payments made by an employer, or a person other than the trustee of the fund, should be considered in determining whether the $600 minimum has been paid.