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OLMS Proposed Rules

Rescission of Form T-1, Trust Annual Report; Require Subsidiary Organization Reporting on the Form LM-2, Labor Organization Annual Report; LMRDA Coverage of Intermediate Labor Organizations   [2/2/2010]
[PDF]
FR Doc 2010-1912
[Federal Register: February 2, 2010 (Volume 75, Number 21)]
[Proposed Rules]               
[Page 5455-5479]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02fe10-21]                         


[[Page 5455]]

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Part V





Department of Labor





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Office of Labor-Management Standards



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29 CFR Part 403



 Rescission of Form T-1, Trust Annual Report; Require Subsidiary 
Organization Reporting on the Form LM-2, Labor Organization Annual 
Report; LMRDA Coverage of Intermediate Labor Organizations; Proposed 
Rule


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DEPARTMENT OF LABOR

Office of Labor-Management Standards

29 CFR Part 403

RIN 1215-AB75

 
Rescission of Form T-1, Trust Annual Report; Require Subsidiary 
Organization Reporting on the Form LM-2, Labor Organization Annual 
Report; LMRDA Coverage of Intermediate Labor Organizations

AGENCY: Office of Labor-Management Standards, Department of Labor.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Labor-Management Standards proposes to amend its 
regulations which require labor organizations to file the Form T-1, 
Trust Annual Report, about certain trusts in which they are interested 
pursuant to the Labor-Management Reporting and Disclosure Act of 1959 
(LMRDA). The Department of Labor (Department) proposes to amend these 
regulations because it believes that the trust reporting required under 
the rule is overly broad and is not necessary to prevent the 
circumvention and evasion of the Title II reporting requirements. 
Moreover, the Department views separate trust reporting requirements as 
unnecessary, in part because the Department also proposes to return 
``subsidiary organization'' reporting to the Form LM-2 reporting 
requirements, which it believes is necessary to satisfy the purposes of 
the LMRDA. Finally, in interpreting the definition of ``labor 
organization'' under the LMRDA, the Department proposes to return to 
its long held view that the statute's coverage does not encompass 
intermediate bodies that are wholly composed of public sector 
organizations. In so doing, the Department has reconsidered a 
definitional interpretation that it adopted in 2003, which the 
Department now considers to have been insufficiently supported during 
the rulemaking process. The Department seeks comment on each of these 
proposals.

DATES: Comments must be received on or before April 5, 2010.

ADDRESSES: You may submit comments, identified by RIN 1215-AB75, only 
by the following methods:
    Internet--Federal eRulemaking Portal. Electronic comments may be 
submitted through http://www.regulations.gov. To locate the proposed 
rule, use key words such as ``Labor-Management Standards'' or ``Labor 
Organization Annual Financial Reports'' to search documents accepting 
comments. Follow the instructions for submitting comments. Please be 
advised that comments received will be posted without change to http://
www.regulations.gov, including any personal information provided.
    Delivery: Comments should be sent to: Denise M. Boucher, Director 
of the Office of Policy, Reports and Disclosure, Office of Labor-
Management Standards, U.S. Department of Labor, 200 Constitution 
Avenue, NW., Room N-5609, Washington, DC 20210. Because of security 
precautions the Department continues to experience delays in U.S. mail 
delivery. You should take this into consideration when preparing to 
meet the deadline for submitting comments.
    The Office of Labor-Management Standards (OLMS) recommends that you 
confirm receipt of your delivered comments by contacting (202) 693-0123 
(this is not a toll-free number). Individuals with hearing impairments 
may call (800) 877-8339 (TTY/TDD). Only those comments submitted 
through http://www.regulations.gov, hand-delivered, or mailed will be 
accepted. Comments will be available for public inspection at http://
www.regulations.gov and during normal business hours at the above 
address.

FOR FURTHER INFORMATION CONTACT: Denise M. Boucher, Director, Office of 
Policy, Reports and Disclosure, Office of Labor-Management Standards, 
Employment Standards Administration, U.S. Department of Labor, 200 
Constitution Avenue, NW., Room N-5609, Washington, DC 20210, (202) 693-
1185 (this is not a toll-free number), (800) 877-8339 (TTY/TDD).

SUPPLEMENTARY INFORMATION: 

I. Authority

    This proposed rescission of the 2008 Form T-1 rule, the proposed 
union reporting requirements concerning subsidiary organizations, and 
the proposed interpretation relating to the coverage of public sector 
intermediate body labor unions under LRMDA section 3(j), 29 U.S.C. 402, 
are made pursuant to section 208 of the LMRDA, 29 U.S.C. 438. Section 
208 authorizes the Secretary of Labor to issue, amend, and rescind 
rules and regulations to implement the LMRDA's reporting provisions, 
and also includes authority to issue rules ``prescribing reports 
concerning trusts in which a labor organization is interested'' as she 
may ``find necessary to prevent the circumvention or evasion of [the 
LMRDA's] reporting requirements.'' 29 U.S.C. 438. Additionally, 
Secretary's Order No. 1-2008, issued May 30, 2008, and published in the 
Federal Register on June 6, 2008, 73 FR 32424 (Jun. 6, 2008), contains 
the delegation of authority and assignment of responsibility for the 
Secretary's functions under the LMRDA to the Assistant Secretary for 
Employment Standards and permits re-delegation of such authority.

II. Background

    In enacting the LMRDA in 1959, Congress sought to protect the 
rights and interests of employees, labor organizations and the public 
generally as they relate to the activities of labor organizations, 
employers, labor relations consultants, and their officers, employees, 
and representatives. The LMRDA was the direct outgrowth of a 
congressional investigation conducted by the Select Committee on 
Improper Activities in the Labor or Management Field, commonly known as 
the McClellan Committee. The LMRDA addressed various ills through a set 
of integrated provisions aimed at labor-management relations governance 
and management. These provisions include LMRDA Title II financial 
reporting and disclosure requirements for labor organizations, their 
officers and employees, employers, labor relations consultants, and 
surety companies. See 29 U.S.C. 431-36, 441.
    The Department has developed several forms to implement the union 
annual reporting requirements of the LMRDA. The reporting detail 
required of labor organizations, as the Secretary has established by 
rule, varies depending on the amount of the labor organization's annual 
receipts. The labor organization annual financial reports required by 
section 201(b) of the Act, 29 U.S.C. 431(b) (Form LM-2, Form LM-3, and 
Form LM-4), are to contain information about a labor organization's 
assets, liabilities, receipts, and disbursements ``as may be necessary 
accurately to disclose its financial condition and operations for its 
preceding fiscal year.'' The Form LM-2 Annual Report, the most detailed 
of the annual labor organization reports and that required to be filed 
by labor organizations with $250,000 or more in annual receipts, must 
include reporting of loans to officers, employees and business 
enterprises; payments to each officer; and payments to each employee of 
the labor organization paid more than $10,000 during the fiscal year, 
in addition to other information.
    In addition to prescribing the form and publication of the LMRDA 
reports, the Secretary is authorized to issue regulations that prevent 
labor unions

[[Page 5457]]

and others from avoiding their reporting responsibilities. Section 208 
authorizes the Secretary of Labor to issue, amend, and rescind rules 
and regulations to implement the LMRDA's reporting provisions, 
including ``prescribing reports concerning trusts in which a labor 
organization is interested'' as she may ``find necessary to prevent the 
circumvention or evasion of [the LMRDA's] reporting requirements.'' 29 
U.S.C. 438.
    Historically, the Department's LMRDA reporting program had not 
provided for separate trust reporting by unions. However, there was a 
long history of reporting on ``subsidiary organization[s].'' Part VIII 
of the 1962 Instructions for Form LM-2 provided for reporting 
concerning these entities, which were defined in the Form LM-2 
instructions as ``any separate organization in which the ownership is 
wholly vested in the labor organization or its officers or its 
membership, which is governed or controlled by the officers, employees 
or members of the labor organization, and which is wholly financed by 
the labor organization.''
    On July 21, 2009, the Department held a public meeting to solicit 
comments from representatives of the community that would be affected 
by the Department's proposed changes. The Department developed its 
proposal with these discussions in mind and it requests comments from 
this community and other members of the public on any and all aspects 
of the proposal.

III. Proposal To Rescind the October 2, 2008 Final Rule Establishing 
the Form T-1

A. History of the Form T-1

    The Form T-1 report was first proposed on December 27, 2002, as one 
part of a proposal to extensively change the Form LM-2. 67 FR 79279 
(Dec. 27, 2002). The rule was proposed under the authority of Section 
208, which permits the Secretary to issue rules ``prescribing reports 
concerning trusts in which a labor organization is interested'' as she 
may ``find necessary to prevent the circumvention or evasion of [the 
LMRDA's] reporting requirements.'' 29 U.S.C. 438. Following 
consideration of public comments, on October 9, 2003, the Department 
published a final rule enacting extensive changes to the Form LM-2 and 
establishing a Form T-1. 68 FR 58374 (Oct. 9, 2003) (2003 Form T-1 
rule). The 2003 Form T-1 rule eliminated the requirement that unions 
report on subsidiary organizations on the Form LM-2, but it mandated 
that each labor organization filing a Form LM-2 report also file 
separate reports to ``disclose assets, liabilities, receipts, and 
disbursements of a significant trust in which the labor organization is 
interested.'' 68 FR at 58477. The reporting labor organization would 
make this disclosure by filing a separate Form T-1 for each significant 
trust in which it was interested. Id. at 58524.
    The 2003 Form T-1 rule defined the phrase ``significant trust in 
which the labor organization is interested'' by utilizing the Sec.  
3(l) statutory definition of ``a trust in which a labor organization is 
interested'' and an administrative determination of when a trust is 
deemed ``significant.'' 68 FR at 58477-78. The LMRDA definition of a 
``trust in which a labor organization is interested,'' is:

A trust or other fund or organization (1) 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 (2) a primary purpose of 
which is to provide benefits for the members of such labor 
organization or their beneficiaries.

Id. (quoting 29 U.S.C. 402(l)).

    The 2003 Form T-1 rule set forth an administrative determination 
that stated that a ``trust will be considered significant'' and 
therefore subject to the Form T-1 reporting requirement under the 
following conditions:

(1) The labor organization had annual receipts of $250,000 or more 
during its most recent fiscal year, and (2) the labor organization's 
financial contribution to the trust or the contribution made on the 
labor organization's behalf, or as a result of a negotiated 
agreement to which the labor organization is a party, is $10,000 or 
more annually.

Id. at 58478.

    The portions of the 2003 rule relating to the Form T-1 were vacated 
by the U.S. Court of Appeals for the District of Columbia Circuit in 
AFL-CIO v. Chao, 409 F.3d 377, 389-391 (D.C. Cir. 2005). The court held 
that the form ``reaches information unrelated to union reporting 
requirements and mandates reporting on trusts even where there is no 
appearance that the union's contribution of funds to an independent 
organization could circumvent or evade reporting requirements by, for 
example, permitting a union to maintain control of funds.'' Id. at 389. 
The court also vacated the Form T-1 portions of the 2003 rule because 
its test failed to establish reporting based on domination or 
managerial control of assets subject to LMRDA Title II jurisdiction. 
The court reasoned that the Department failed to explain how the test 
promulgated--selection of one member of a board and a $10,000 
contribution to a trust with $250,000 in receipts--could result in 
union domination and control sufficient to give rise to circumvention 
or evasion of Title II reporting requirements. Id. at 390. In so 
holding, the court emphasized that Section 208 authority is the only 
basis for LMRDA trust reporting, that this authority is limited to 
preventing circumvention or evasion of Title II reporting, and that 
``the statute doesn't provide general authority to require trusts to 
demonstrate that they operate in a manner beneficial to union 
members.'' Id. at 390.
    Following the 2003 vacatur of the provision of the final rule 
relating to the Form T-1, the Department issued a revised Form T-1 
final rule on September 9, 2006. 71 FR 57716 (Sept. 9, 2006) (2006 Form 
T-1 rule). The U.S. District Court for the District of Columbia vacated 
this rule due to a failure to provide a new notice and comment period. 
AFL-CIO v. Chao, 496 F. Supp. 76 (D.C. 2007). The district court did 
not engage in a substantive review of the 2006 rule, but the court 
noted that the AFL-CIO demonstrated that ``the absence of a fresh 
comment period constituted prejudicial error'' and that the AFL-CIO 
objected with ``reasonable specificity'' to warrant relief vacating the 
rule. Id. at 90-92.
    The Department issued a proposed rule for a revised Form T-1 on 
March 4, 2008. 73 FR 11754 (Mar. 4, 2008). After notice and comment, 
the 2008 Form T-1 rule was issued on October 2, 2008. 73 FR 57412. This 
rule attempted to remedy the failings of the Department's 2003 and 2006 
efforts in implementing a Form T-1. 73 FR at 57413. The 2008 Form T-1 
rule became effective on December 31, 2008. Under this rule, Form T-1 
reports would be filed no earlier than March 31, 2010 for fiscal years 
that begin no earlier than January 1, 2009.
    The 2008 Form T-1 rule stated that labor organizations with total 
annual receipts of $250,000 or more must file a Form T-1 for those 
section 3(l) trusts in which the labor organization, either alone or in 
combination with other labor organizations, had management control or 
financial dominance. 73 FR at 57411. For purposes of the rule, a labor 
organization had management control if the labor organization alone, or 
in combination with other labor organizations, selected or appointed 
the majority of the members of the trust's governing board. Further, 
for purposes of the rule, a labor organization had financial dominance 
if the labor organization alone, or in combination with other labor 
organizations, contributed more than 50 percent of the

[[Page 5458]]

trust's receipts during the annual reporting period. Significantly, the 
rule treated contributions made to a trust by an employer pursuant to a 
collective bargaining agreement as constituting contributions by the 
labor organization.
    Additionally, the 2008 Form T-1 rule provided exceptions to the 
Form T-1 filing requirements. No Form T-1 was required for a trust: 
Established as a political action committee (PAC) fund if publicly 
available reports on the PAC fund were filed with federal or state 
agencies; established as a political organization for which reports are 
filed with the IRS under section 527 of the IRS code; required to file 
a Form 5500 under the ERISA; constituting a federal employee health 
benefit plan that is subject to the provisions of the Federal Employees 
Health Benefits Act (FEHBA). Similarly, the rule clarified that no Form 
T-1 was required for any trust that met the statutory definition of a 
labor organization and files a Form LM-2, Form LM-3, or Form LM-4 or 
trust that the LMRDA exempted from reporting, such as an organization 
composed entirely of state or local government employees or a state or 
local central body.

B. Reasons for the Proposal To Rescind the October 2, 2008 Form T-1 
Final Rule

    The Department is proposing to rescind the 2008 Form T-1 rule 
because it believes that the trust reporting required under the rule is 
overly broad and that such trust reporting is not necessary to prevent 
the circumvention and evasion of the Title II reporting requirements. 
Moreover, the Department has reviewed the 2008 rulemaking record and no 
longer views the separate reporting requirements as set forth in the 
2008 Form T-1 rule as justified in light of the burden they impose.
    Under the Act, the Secretary has the authority to ``issue, amend, 
and rescind rules and regulations prescribing the form and publication 
of reports required to be filed under this title and such other 
reasonable rules and regulations (including rules concerning trusts in 
which a labor organization is interested) as he may find necessary to 
prevent the circumvention or evasion of such reporting requirements.'' 
29 U.S.C. 438. The Secretary's regulatory authority thus includes the 
reporting mandated by the Act and discretionary authority to require 
reporting on trusts falling within the statutory definition of a trust 
``in which a labor organization is interested.'' 29 U.S.C. 402(l). The 
Secretary's discretion to require separate trust reporting applies to 
trusts if: (1) The union has an interest in a trust as defined by 29 
U.S.C. 402(l) and (2) reporting is determined to be necessary to 
prevent the circumvention or evasion of Title II reporting 
requirements. 29 U.S.C. 438. As both the Department and the court 
recognized, this is a two part requirement. See AFL-CIO v. Chao, 409 
F.3d 377, 386-87 (D.C. Cir. 2005) (discussion of two-part test).
    A key feature of the Secretary's discretionary authority to require 
trust reporting is the requirement that the Secretary conclude that 
such reporting is ``necessary'' to prevent circumvention or evasion of 
a labor organization's requirement to report on its finances under the 
LMRDA. The Department now believes that the 2008 Form T-1 rule was 
overly broad, requiring financial reporting by many trusts, including 
trusts funded by employers pursuant to collective bargaining 
agreements, without an adequate showing that such a change is necessary 
to prevent circumvention or evasion of the reporting requirements.
    The Department proposes to rescind the 2008 Form T-1 rule, because 
the Department now believes that the final rule is not necessary to 
prevent circumvention or evasion of existing reporting requirements and 
that an adequate assessment of the interaction between labor 
organizations and section 3(l) trusts would be needed to justify 
additional reporting. However, it is the Department's position, 
consistent with the D.C. Court of Appeals' opinion in AFL-CIO v. Chao, 
that the Department retains the authority to regulate trust reporting 
when the two-part test is satisfied. AFL-CIO v. Chao, 409 F.3d at 386-
87 (D.C. Cir. 2005). In this proposal, the Department simply suggests 
that based on its review of the 2008 Form T-1 rule and its rulemaking 
record, the imposition of a separate reporting requirement for unions 
on their section 3(l) trusts is not necessary to prevent circumvention 
or evasion of the reporting requirements.
    In particular, the rule provided that, for purposes of evaluating 
whether payments to a trust indicate that the union is financially 
dominant over the trust, payments made by employers to set up trusts 
under Section 302(c) of the LMRA, 29 U.S.C. 186(c) (Taft-Hartley 
funds), should be treated as funds of the union. Taft-Hartley funds are 
created and maintained through employer contributions paid to a trust 
fund, pursuant to a collective bargaining agreement, and must have 
equal numbers of union and management trustees, who owe a duty of 
loyalty to the trust. Taft-Hartley funds are established for the ``sole 
and exclusive benefit of the employees'' and are excepted from the 
statutory prohibition against an employer paying money to employees, 
representatives, or labor organizations. See 29 U.S.C. 186(a) and 
(c)(5).
    The Department recognizes that its authority under section 3(l) to 
require reporting of trusts in which a union is interested is 
sufficiently broad to encompass Taft-Hartley plans funded by employer 
contributions. However, as explained above, this is only the first part 
of the section 208 analysis. The second part of the analysis requires 
that the Secretary determine that the reporting is necessary to prevent 
circumvention or evasion of the reporting of union money subject to 
Title II.
    As explained in the 2008 Form T-1 rule, section 201 of the LMRDA 
requires that unions ``file annual, public reports with the Department, 
detailing the labor organization's financial condition and operations 
during the reporting period, and, as implemented, identifying its 
assets and liabilities, receipts, salaries and other direct or indirect 
disbursements to each officer and all employees receiving $10,000 or 
more in aggregate from the labor organization, direct or indirect loans 
(in excess of $250 aggregate) to any officer, employee, or member, any 
loans (of any amount) to any business enterprise, and other 
disbursements.'' 73 FR at 57413 (citing 29 U.S.C. 431(b)). Further, 
section 201 requires that such information shall be filed ``in such 
detail as may be necessary to disclose [a labor organization's] 
financial condition and operations.'' 73 FR at 57414 (citing Id.). 
Significantly, each listed reportable financial transactions to be 
reported is one that reflects upon the union's financial condition and 
operations, not solely the financial condition and operations of 
another entity.
    Thus, under the Act, the Secretary may require trust reporting when 
she concludes it is necessary to prevent the circumvention or evasion 
of labor organization's Title II reporting requirements. See 29 U.S.C. 
208. The Title II reporting requirements for a labor organization 
require it ``to disclose its financial condition and operations.'' 29 
U.S.C. 201(b) (emphasis added). Consequently, trust reporting is 
permissible to prevent a labor union from using a trust to circumvent 
reporting of the labor union's finances.
    The 2008 Form T-1 rule did not adequately address the second part 
of the two-part test when it presumed that employer contributions 
establish labor union financial domination of a trust. Indeed, the 
money contributed by the employer to a Taft-Hartley fund is not 
generally the property of the union, and

[[Page 5459]]

thus its disclosure by a union would not ``disclose its financial 
condition and operations.'' 29 U.S.C. 201(b) (emphasis added). 
Conversely, a union's nondisclosure of such funds would not be an 
evasion of the union's reporting requirement. Such ordinary employer 
funds, not within the control of the union, would in no instance be 
reported by a union under the LMRDA reporting requirements. Such 
payments are generally paid by the employer to the Taft-Hartley trust 
for the sole and exclusive benefit of the employees, and it appears 
that the payment and use of these moneys would not ordinarily relate to 
the condition and operations of the union. Consequently, the Department 
now believes that the 2008 Form T-1 rule was overly broad, requiring 
reporting in instances where a union is not in a position to use a 
trust to circumvent or evade its reporting requirement.
    In an apparent acknowledgement that the 2008 Form T-1 rule was 
premised upon policies in addition to preventing circumvention of Title 
II reporting, the final rule stated that, ``by requiring that labor 
organizations file the Form T-1 for specific section 3(l) trusts, labor 
organization members and the public will receive some of the same 
benefit of transparency regarding the trust that they now receive under 
the Form LM-2, thereby preventing a labor organization from using the 
trust to circumvent or evade its reporting requirements.'' 73 FR at 
57413. This rationale indicates that the rule may have provided for 
more general reporting than would be ``necessary to prevent'' the 
circumvention of LMRDA reporting requirements.
    The 2008 NPRM asserted that ``money paid into the trusts reflects 
payments that otherwise could be made directly to employees as wages, 
benefits, or both, but for their assignment to the trusts.'' 73 FR 
11761 (NPRM) 73 FR 57417 (final rule). Assuming this is so, these 
underlying wages and benefits would not have been reported on a Form 
LM-2. Therefore it is not apparent that payment of these wages and 
benefits to a trust involves the circumvention or evasion of Title II 
reporting, regardless of the purported control a union exercises with 
an employer concerning such a trust. Thus, with respect to these funds, 
it is not clear from the final rule how the Form T-1 ``provides 
transparency of labor organization finances and effectuates the goals 
of the LMRDA.'' (emphasis added) 73 FR 57414.
    In addition, the final rule states that the Form T-1 will prevent 
union officials or others with influence over the union from 
``avoid[ing], simply by transferring money from the labor 
organization's books to the trust's books, the basic reporting 
obligation that would apply if the funds had been retained by the labor 
organization.'' 73 FR 57414. The Department acknowledges that such 
transfers of money to a Taft-Hartley trust may constitute circumvention 
or evasion of the union's reporting requirements, but the final rule 
did not distinguish between those Taft-Hartley trusts that are 
exclusively funded by employers from those in which the union does 
transfer money. Only in the latter instance would the Form T-1 capture 
a union's circumvention of its Title II reporting requirements. 
Instead, the final rule covers all Taft-Hartley plans through its 
``financial domination'' test.
    In AFL-CIO v. Chao, the Court of Appeals for the D.C. Circuit held 
that the first ``Form T-1 reaches information unrelated to union 
reporting requirements and mandates reporting on trusts even where 
there is no appearance that the union's contribution of funds to an 
independent organization could circumvent or evade union reporting 
requirements.'' AFL-CIO v. Chao, 409 F.3d at 389. The Department 
proposes that the 2008 Form T-1 rule may be overly broad in the same 
manner, requiring many labor organizations to file the Form T-1 for 
independent trusts, even where there is no apparent means by which the 
union could use the trust as a means of circumventing or evading its 
Title II reporting requirements.
    In sum, the Department proposes to withdraw the rule implementing 
the Form T-1, because it believes that the trust reporting required 
under the rule is overly broad and is not necessary to prevent the 
circumvention and evasion of the Title II reporting requirements. The 
Department invites comments on its proposal to rescind the 2008 Form T-
1 rule.

IV. Proposal To Reinstate Subsidiary Organization Reporting on the Form 
LM-2

    As part of the requirement to report on independent trusts, the 
2008 Form T-1 rule established Form T-1 reporting obligations for labor 
union subsidiary organizations, entities wholly owned, controlled, and 
financed by a single union. The Department believes that a substantial 
number of Form T-1 reports it would have received would have been for 
subsidiary organizations. During the 2004 reporting year, the last year 
in which unions filed annual reports on the old Form LM-2, 
approximately 1,087 filers indicated that they had at least one 
subsidiary organization. Additionally, in the Department's experience 
about half of the approximately 100 largest labor organizations have 
multiple subsidiaries, with these 50 unions having about two additional 
subsidiaries. Thus, the Department estimates approximately 1,187 
subsidiaries for Form LM-2 filers (the 1,087 filers with subsidiaries 
plus an additional 100 for the 50 unions with two additional 
subsidiaries). Further, the Form T-1 final rule estimated an average of 
3,131 Form T-1 reports per fiscal year. 73 FR at 57441. Therefore, the 
Department estimates that more than one-third of Form T-1 reports would 
have been for subsidiary organizations. See Paperwork Reduction Act 
Analysis.
    Prior to the 2003 Form LM-2 changes, labor organizations were 
required to report under the Form LM-2 reporting requirements.\1\ 
Subsidiary organizations were defined in the Form LM-2 instructions as 
``any separate organization of which the ownership is wholly vested in 
the reporting labor organization or its officers or its membership, 
which is governed or controlled by the officers, employees, or members 
of the reporting labor organization, and which is wholly financed by 
the reporting labor organization.'' See pre-2003 Form LM-2 
Instructions, Section X.\2\ This requirement was dropped in the October 
2003 modifications to the Form LM-2. See 68 FR at 58414. While not made 
explicit in the final regulation, the Department's assumption at that 
time was that the prior subsidiary organization reporting would be 
captured by the new requirement for trust reporting on the Form T-1, 
which was also introduced in that final rule. This result is implied by 
the Department's comment in the 2008 Form T-1 rule that ``the Form T-1 
closes a reporting gap under the Department's former rule whereby labor 
organizations were only required to report on `subsidiary 
organizations.' '' 73 FR at 57412.
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    \1\ The 2003 changes retained the requirement for labor 
organizations to include the receipts of their subsidiaries when 
determining if they have met the $250,000 filing threshold. See Form 
LM-2 Instructions, Part II.
    \2\ The pre-2003 Form LM-2 Instructions can be viewed at http://
www.regulations.gov.
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    However, the Department believes that subsidiary reporting is more 
appropriate on the Form LM-2, rather than the Form T-1, because 
subsidiaries are properties of labor organizations similar to any other 
account, fund, or

[[Page 5460]]

asset.\3\ As a result, for a union's Form LM-2 to be complete, the 
Department believes that form should contain information on 
subsidiaries, as this will result in a Form LM-2 reporting scheme that 
treats all assets of the union uniformly, i.e., with the same reporting 
threshold and level of itemization. By including subsidiaries on the 
Form LM-2 and treating all union assets uniformly, the Department 
believes that the Form LM-2 will produce a more comprehensive and 
accurate report of a union's financial condition. This proposal would 
also align the Form LM-2 with the Form LM-3, which was unaffected by 
the Form T-1 and has continued to include subsidiary reporting. 
Finally, the inclusion of subsidiaries on the Form LM-2 will alleviate 
potential misunderstandings relating to the reporting of a union's 
total annual receipts. Currently, for purposes of determining whether a 
particular union must file a Form LM-2 (receipts of $250,000 or more) 
or a Form LM-3 (receipts less than $250,000), receipts of subsidiaries 
are included, even though these receipts are reported on the Form T-1 
and are not reported on the Form LM-2. Thus, some unions with 
subsidiaries are required to file an LM-2, even though they may report 
receipts of less than $250,000, once the subsidiary's receipts are 
subtracted. This may lead to confusion on the part of union members and 
the public. For these reasons, explained more fully below, the 
Department proposes that incorporating subsidiaries on the Form LM-2 
provides more information about the subsidiaries and a more accurate 
report of the union as a whole, reducing the potential for 
misunderstandings by union members and the public.
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    \3\ Indeed, in U.S. v. Hartsel, the Sixth Circuit held that a 
charitable organization with a separate not-for-profit tax status 
constituted a fund of a labor organization for purposes of section 
501(c) of the Act, as the union in question created the fund, 
financed it by soliciting contributions from the members, and 
managed and controlled it by appointing its officers. U.S. v. 
Hartsel, 199 F.3d 812, 819-820 (6th Cir. 1999); see also U.S. v. 
LaBarbara, 129 F.3d 81 (2d Cir. 1987) (holding that assets of a not-
for-profit building corporation controlled by a union comprise the 
assets of a labor organization under section 501).
---------------------------------------------------------------------------

    The 2008 Form T-1 actually reduced the level of disclosure of core 
union financial activities through subsidiaries. First, the Form T-1 
reduces transparency regarding the reporting of assets and liabilities 
of subsidiary organizations. The Form LM-2 includes Schedules 1 through 
10, which require detailed itemization of the union's assets and 
liabilities. The Form T-1 requires that unions report their assets and 
liabilities only in the aggregate at Items 21 and 22. Thus, a report on 
a subsidiary's assets and liabilities will have more information when 
the filer uses a Form LM-2, rather than a Form T-1. Second, the Form T-
1 reduces the level of transparency and disclosure of these entities, 
because it has a higher reporting threshold for receipts and 
disbursements. The Form LM-2 requires that all union assets, 
liabilities, receipts and disbursements exceeding $5,000 in value be 
itemized and reported. The Form T-1 has a reporting threshold of 
$10,000. A union, therefore, reporting on a subsidiary's financial 
transaction will disclose a greater number of transactions using the 
Form LM-2, as compared to the Form T-1.
    The return of subsidiary organizations to the Form LM-2 reporting 
requirements will restore the prior status quo concerning the financial 
disclosure of such entities, which was that a union must disclose the 
financial information of its subsidiary to the same level of detail as 
other assets of the union, even if the union chose to file a separate 
Form LM-2 report for the subsidiary or to file an audit for the entity. 
See pre-2003 Form LM-2 Instructions, Section X.
    A labor union using the pre-2003 Form LM-2 could report on its 
subsidiary organizations in one of three ways. The filer could (1) 
Consolidate the financial information for the subsidiary and the labor 
organization in a single Form LM-2; (2) file a separate Form-2 report 
for the subsidiary organization, along with a Form LM-2 for the union; 
or (3) file along with a Form LM-2 for the union a regular annual 
report of the financial condition and operations of the subsidiary 
organization. As explained in more detail below, the Department 
proposes to allow Form LM-2 filers two options regarding the reporting 
of their subsidiaries, rather than the three options formerly permitted 
in the pre-2003 Form LM-2 Instructions. The Department proposes that 
Form LM-2 filers can either consolidate their subsidiaries' financial 
information on their Form LM-2 report, or they can file, with their 
Form LM-2 report, a regular annual report of the financial condition 
and operations of the subsidiary organization, accompanied by a 
statement signed by an independent public accountant certifying that 
the financial report presents fairly the financial condition and 
operations of the subsidiary organization and was prepared in 
accordance with generally accepted accounting principles.
    The Department proposes to remove one previous option for filers--
that of filing a separate Form LM-2 report with only the subsidiary's 
financial information. This reporting option, which results in a union 
filing more than one Form LM-2 report for a single fiscal year, may 
create confusion for union members and the public. First, because there 
is only one version of the Form LM-2, it would be difficult to tell 
whether a report is for a subsidiary, for a labor union, or both and as 
a result, an individual looking at a union's Form LM-2 may not be aware 
that the union has a subsidiary, and that a separate form exists for 
that entity. Second, having an entity that is not a labor organization 
reporting on a form for labor organizations also may create confusion 
for the Department. The Department relies upon the database of Form LM-
2 filers for informational, policy, and enforcement purposes. To the 
extent that subsidiary organizations file separate Form LM-2 reports, 
the Department believes that the data will not accurately reflect the 
universe of labor organizations. Third, where a union changes its 
reporting practices, one year including the subsidiary and filing a 
separate form the next, conducting a year-to-year comparison becomes 
difficult, which also affects the Department's ability to rely upon the 
Form LM-2 filer database for policy and enforcement decisions. Finally, 
in some cases, transparency may be increased when the union and the 
subsidiary share certain expenses that standing alone fall below the 
itemization threshold, but when combined in a single report, will then 
be itemized. In sum, consolidation has the virtue of including all 
financial information (that of the union and the subsidiary) on one 
report, which eliminates potential confusion among union members, 
presents the Department with a more reliable database of Form LM-2 
filers, and increases overall transparency. Thus, the Department 
proposes to permit a union to consolidate on its Form LM-2 the 
financial information of the union with the financial information of 
the subsidiary, as well as the option to file a separate financial 
statement certified by a public accountant. The Department seeks 
comment on these choices for filers.
    At the same time, the Department proposes to revise the Form LM-3 
subsidiary organization instructions to conform with the instructions 
proposed for the Form LM-2. Labor organizations filing Form LM-3 
reports are required to report concerning their subsidiary 
organizations and now have the option of using one of three reporting 
methods. The Form LM-3 filers may (1)

[[Page 5461]]

consolidate the financial information for the subsidiary organization 
and the labor organization in a single Form LM-3; (2) file a separate 
Form-3 report for the subsidiary organization with the union's Form LM-
3 report; or (3) file with the union's Form LM-3 report the regular 
annual report of the financial condition and operations of the 
subsidiary organization. For the reasons discussed above, the 
Department proposes to eliminate the second option and seeks comments 
on this proposal.

V. Specific Proposed Changes to the Form LM-2 and Instructions

    The text of the Form LM-2, its Instructions pertaining to some 
sections, and certain Schedules will be changed to address the proposal 
to require reporting of subsidiary organizations. These include 
Sections II, VIII, X, and XI. The proposed modified instructions are 
included in an appendix to the NPRM, and the following is a section by 
section overview of the changes.
    Section II. What Form to File: The Department proposes to revise 
the instructions to indicate that all special funds and funds of 
subsidiary organizations should be included in the ``total annual 
receipts'' of the labor organization. Cites to revised Section VIII 
(Funds to be Reported) and Section X (Labor Organizations with 
Subsidiary Organizations) are included in the proposed instructions. 
Additionally, the instructions specify that receipts of section 3(l) 
trusts are not to be included in ``total annual receipts,'' unless such 
3(l) trusts are subsidiary organizations of the union. Since the 
Department proposes to return to the prior Form LM-2 reporting regime 
for subsidiaries, the proposed instructions remove the current 
references to trusts that are ``wholly owned, wholly controlled, and 
wholly financed by the labor organization,'' as such entities are now 
``subsidiary organizations.''
    Section VIII--Funds to be Reported: The Department proposes to 
revise this section to remove any reference to the Form T-1, and to 
clarify that ``special purpose funds'' include those of subsidiary 
organizations (with a cite to revised Section X: Labor Organizations 
with Subsidiary Organizations).
    Section X--Labor Organizations with Subsidiary Organizations: The 
Department proposes to eliminate the current Section X, which provides 
information on section 3(l) trusts and the Form T-1, replacing this 
with information on subsidiary organizations, including its definition 
and the requirement to include its financial information on the Form 
LM-2, and ways in which a labor organization can properly report on 
their Form LM-2 the necessary information about such subsidiaries. The 
instructions are similar to the pre-2003 instructions for subsidiaries, 
with the primary difference being that, as explained above, the 
Department proposes that unions are provided two options instead of 
three for filing information on subsidiaries: Option one, 
consolidation, or option two, the attachment of an audit. Unions would 
not file a separate Form LM-2 report for the subsidiary. The proposed 
Section X also includes information on what each option requires.
    Section XI--Completing Form LM-2: The Department proposes changes 
to the instructions to Items 10 and 11. The instructions for Item 10 
would be changed to remove any reference to the Form T-1, although 
basic information about the trust would still be required, as would a 
cite to any report filed for the trust with another government agency, 
such as the Department's Employee Benefits Security Administration 
(EBSA).
    The Department proposes to split Item 11 into two parts: Item 
11(a), which is the current Item 11 referencing political action 
committees (PACs), and Item 11(b), which would ask unions to indicate 
if they had a subsidiary organization during the reporting period. The 
Department believes that since PACs may be subsidiary organizations, it 
is reasonable to include each of these in the same item on the form. 
The instructions for Item 11 will become the instructions for Item 
11(a), while the proposed new instructions for Item 11(b) will simply 
state that unions must check this item if they have a subsidiary 
organization and must detail the name, address, and purpose of each of 
its subsidiary in Item 69 (Additional Information), including which 
filing method was chosen. The instructions would also reference 
proposed Section X of the instructions for more information on 
subsidiaries.
    Schedules and Instructions for Schedules: The Department proposes 
revisions to certain Form LM-2 Schedules and Instructions to reflect 
the rescission of Form T-1 trust reporting and the reinstatement of 
subsidiary organization reporting on the Form LM-2, as proposed in the 
NPRM. Specifically, these Schedules and Instructions include:
     Schedule 5--Investments Other Than U.S. Treasury 
Securities, Item 6
     Instructions for Schedule 2--Loans Receivable,
     Instructions for Schedule 5--Investments Other Than U.S. 
Treasury Securities,
     Instructions for Schedule 7--Other Assets, and
     Instructions for Schedule 12--Disbursements to Employees.
    The Department seeks comments on its proposed changes to the Form 
LM-2 and Instructions.

VI. Specific Proposed Changes to the Form LM-3 and Instructions

    The text of the Form LM-3 and Instructions pertaining to some 
sections will be changed to address the reporting of subsidiary 
organizations. With respect to the Form, the Department proposes to 
remove Item 3(c), which currently requires a reporting labor 
organization to identify if the report is exclusively filed for a 
subsidiary organization, as the Department proposes to remove this 
option, as described above. The proposed revised Form LM-3 Instructions 
include changes to sections VIII and X.
    Regarding Section VIII, the only proposed change would clarify that 
filers have only two options, rather than the current three: Either 
consolidation or attaching a separate report, that of an audit by a 
certified public accountant. Filers can no longer attach a separate 
Form LM-3 for the subsidiary. The proposed Section VIII also references 
Section X of the Form LM-3 instructions for more information on 
subsidiaries and subsidiary reporting.
    The proposed changes to Section X, Labor Organizations with 
Subsidiaries, are virtually identical to the changes proposed to the 
corresponding Section X of the Form LM-2. Specifically, proposed 
section X would provide information on subsidiary organizations, 
including its definition and the requirement to include its financial 
information on the Form LM-3, and ways in which a labor organization 
can properly report on their Form LM-3 the necessary information about 
such subsidiaries. The instructions are similar to the current 
instructions for subsidiaries, with the primary difference being that, 
as explained above, the Department proposes that unions have only two 
options instead of three for filing information on subsidiaries: Option 
one, consolidation, or option two, the attachment of an audit. Unions 
no longer would have the option of filing a separate Form LM-3 report 
for the subsidiary. The proposed Section X also includes information on 
what each option requires.
    The Department seeks comments on its proposed revisions to the Form 
LM-3 and instructions.

[[Page 5462]]

VII. Proposal To Revise the Interpretation Regarding Public Sector 
Intermediate Bodies

    The Department proposes to revise its recently articulated policy 
regarding LMRDA coverage of certain public sector intermediate bodies, 
which was based on an interpretation of the definition of ``labor 
organization'' found in Section 3(i) and (j) of the LMRDA, 29 U.S.C. 
402(i) and (j), by returning to the interpretation the Department held 
for nearly 40 years. The definitional criteria for ``labor 
organization'' in the statute are patently ambiguous, and therefore 
susceptible to two legally permissible interpretations. See Alabama 
Education Ass'n v. Chao, 455 F.3d 386 (D.C. Cir. 2006). The Department 
now considers, for the reasons set forth below, that its long-held 
interpretation, which excludes from coverage certain intermediate labor 
organizations that have as members only public sector local unions, 
better serves the purposes of the statute. The Department seeks 
comments from the public on this change.
    Between 1963 and 2003, the Department's interpretation of the LMRDA 
excluded from coverage intermediate labor organizations composed solely 
of public sector labor unions.\4\ In 2003, the Department revised its 
interpretation, thereby imposing on these never-before covered public-
sector intermediate bodies financial reporting obligations under the 
statute.\5\ The Department's revised statutory interpretation was 
offered as a construction of the ``which includes'' clause in Section 
3(j)(5), 29 U.S.C. 402(j)(5).\6\ In its 2003 interpretation the 
Department read the clause to modify the phrase ``national or 
international labor organization,'' thus establishing coverage over an 
intermediate body that did not itself include a private sector local 
labor organization, so long as the national or international labor 
organization to which it was subordinate included a private sector 
labor organization.\7\ Newly covered intermediate bodies challenged the 
2003 interpretation in court, and years of litigation ensued.\8\ The 
Department has recently undertaken a review of the revised 
interpretation of Section 3(i) and (j)(5) adopted in 2003 and the 
policy justifications for implementing it. The Department now considers 
that its prior long-standing policy is preferred. This policy is 
consistent with the conclusion that the `which includes' condition 
modifies the statutory list of intermediate bodies, thereby 
establishing coverage over only those intermediate bodies that are 
subordinate to a national or international labor organization and that 
themselves include one or more private sector labor organizations. The 
Department seeks input from the public on this issue.
---------------------------------------------------------------------------

    \4\ Section 3(i) of the LMRDA, 29 U.S.C. 402(i), defines a 
``labor organization'' as (1) any organization ``engaged in an 
industry affecting commerce * * * in which employees participate and 
which exists for the purpose, in whole or in part, of dealing with 
employers concerning grievances, labor disputes, wages, rates of 
pay, hours, or other terms or conditions of employment,'' or (2) 
``any conference, general committee, joint or system board, or joint 
council so engaged which is subordinate to a national or 
international labor organization other than a State or local central 
body.'' The first clause of Section 3(i) applies to entities that 
exist, at least in part, to deal with employers concerning terms and 
conditions of employment. Although ``employer'' is defined broadly 
in the Act, the United States, States and local governments are 
expressly excluded from this definition. 29 U.S.C. 402(e). Thus, an 
organization is not covered under the first clause of Section 3(i), 
which requires that the organization deal with a statutory 
``employer,'' if it deals only with federal, state or local 
governments. The second clause of the definition applies to 
conferences, general committees, joint or system boards or joint 
councils--entities that are known as ``intermediate'' labor 
organizations. See 29 CFR 451.4(f).
    \5\ Although the revision of the Department's interpretation was 
initiated in 2002, it was completed in 2003 with the publication of 
the final rule, 68 FR 58,374 (Oct. 9, 2003). See footnote 7, infra.
    \6\ Section 3(j) of the LMRDA, 29 U.S.C. 402(j), sets forth the 
circumstances under which labor organizations will be ``deemed to be 
engaged in an industry affecting commerce'' under the Act. In 
particular, Section 3(j)(5) of the Act provides that an intermediate 
labor organization is deemed ``engaged in an industry affecting 
commerce'' if it is ``a conference, general committee, joint or 
system board, or joint council, subordinate to a national or 
international labor organization, which includes a labor 
organization engaged in an industry affecting commerce within the 
meaning of any of the preceding paragraphs of this subsection, other 
than a State or local central body.'' 29 U.S.C. 402(j)(5) (emphasis 
added).
    \7\ See Labor Organization Annual Financial Reports, 67 FR 
79,280 (Dec. 21, 2002) (NPRM); Labor Organization Annual Financial 
Reports, 68 FR 58,374 (Oct. 9, 2003) (Final Rule); Labor 
Organization Annual Financial Reports Policy Statement; 
Interpretation, 72 FR 3735 (Jan. 26, 2007) (court-ordered analysis 
supporting Department's interpretative change).
    \8\ See Alabama Education Ass'n v. Chao, 2005 WL 736535 (D.D.C. 
Mar 31, 2005) (holding new interpretation invalid); 455 F.3d 386 
(2006) (reversing lower court and remanding to Department for 
further explanation of policy justifications for new 
interpretation); 539 F.Supp 2d 378 (D.D.C. 2008) (upholding 
Department's policy justification for interpretive change), 595 
F.Supp. 2d 93 (D.D.C. 2009) (denial of reconsideration). The 
plaintiff state affiliates have appealed the most recent decision of 
the district court in this litigation, but on May 5, 2009, the DC 
Circuit granted the Department's motion to stay the appeals pending 
resolution of this regulatory proceeding.
---------------------------------------------------------------------------

    The grounds for the Department's 2003 interpretative change have 
been the subject of significant criticism during the rulemaking and 
litigation processes. During the comment period for the NPRM, several 
labor organizations, including the AFL-CIO, the American Federation of 
Teachers (AFT), the National Education Association (NEA) and the 
International Association of Firefighters, challenged the change in 
interpretation. The primary contention of these comments was that the 
Department's interpretation improperly expanded the statute's well-
established coverage limitations over private-sector labor 
organizations to include those labor organizations that had no private 
sector members at all. For instance, the NEA noted that although its 
local affiliates primarily represent public school teachers, certain 
local affiliates also represent a small number of private-sector 
employees, and this fact justified the national organization's coverage 
under the LMRDA. However, with regard to its state-level affiliates, 
the NEA indicated that the new interpretation would impose significant 
recordkeeping and reporting burdens on state labor organization 
affiliates that are composed only of public sector members. The AFT's 
comment similarly criticized the Department for over-reaching with 
regard to state-level affiliates composed solely of public-sector 
members. Labor organization commenters also criticized the legal 
reasoning behind the Department's new interpretation.
    The textual basis for the Department's revised interpretation was 
upheld by the Court of Appeals for the DC Circuit, but not without 
skepticism. See Alabama Education, 455 F.3d at 396 (plaintiff labor 
organizations ``may have the better reading of the statute * * *'').\9\ 
Ultimately, the appellate court determined that the Department's new 
statutory interpretation was not supported by a justification adequate 
to sustain the policy change, and thus the court remanded the case to 
the Department for further explanation of the policy rationale 
supporting the changed interpretation. Id. at  396-397. In reviewing 
the Department's newly developed policy rationale on remand, the 
district court stated that it would withhold comment on whether ``the 
Secretary is hitting a gnat with a hammer[,]'' suggesting that the 
labor

[[Page 5463]]

organization transparency problems identified by the Department were 
insignificant in comparison to the demands of coverage imposed on the 
newly covered intermediate labor unions. Alabama Education, 539 
F.Supp.2d at 385. The district court also noted that the State 
affiliates' challenges to the Department's policy justifications raise 
``serious issues'' that ``might convince the court, were it the 
[policy] decisionmaker'' and not limited by a narrow standard of 
review, to reject the Department's rationales for the new 
interpretation. Id. at 379. The limited nature of the court's review 
also caused the district court to overlook the ``multitude of practical 
objections'' to the new policy. Id. at 380 n. 2.
---------------------------------------------------------------------------

    \9\ The court reviewed the Department's interpretation under the 
``two-step analysis'' of Chevron, U.S.A., Inc. v. Natural Resources 
Defense Council, 467 U.S. 837 (1984). Addressing Chevron's step one, 
the Court concluded that the text of Section 3(j)(5) and the 
application of the ``which includes'' clause was ambiguous, and that 
the LMRDA's legislative history ``merely confirm[ed] the inherent 
ambiguity of the statute.'' 455 F.3d at 394 and n.*. Accordingly, 
the Court concluded that nothing in LMRDA Section 3 ``forecloses the 
possibility that a body without private sector members may be 
subject to the LMRDA if it is subordinate to or part of a larger 
organization that does have private sector members.'' Id. at 394-
395.
---------------------------------------------------------------------------

    Unlike the reviewing courts, the Department's role as administrator 
of the statute is not so circumscribed that it can or should continue 
to ignore the ``serious issues'' or ``multitude of practical 
objections'' associated with the policy shift. Indeed, the Department's 
administrative and enforcement functions demand a reevaluation of the 
policy underlying its 2003 interpretation in light of the criticisms 
from both the regulated community and the reviewing courts. Therefore, 
the Department now considers other factors that militate against the 
imposition of the LMRDA, including its reporting obligations, on 
intermediate labor organizations without private sector members.
    It is well-settled that the LMRDA was enacted to promote democracy 
and transparency in labor organizations that act on behalf of employees 
employed in the private sector. 29 U.S.C. 401(b), (c). It is equally 
settled that Congress intended to exclude from coverage local, 
national, and international labor organizations representing only 
employees in the public sector, and the overall thrust of the statute 
comports with that private-sector-only coverage. See Alabama Education, 
455 F.2d at 394-95; see also Thompson v. McCombe, 99 F.3d 352, 353 (9th 
Cir. 1996) (``A labor organization composed entirely of public sector 
employees is not a labor organization for purposes of the LMRDA.'').
    Nevertheless, the Department justified its 2003 policy shift in 
part by suggesting that reading the statute's coverage provisions as 
broadly as possible offered increased transparency and accountability. 
72 FR at 3738. Transparency and accountability of labor organizations 
are indeed valued goals, but they are not the sole, overriding purpose 
of the statute, and LMRDA coverage for the purpose of reporting and 
disclosure also exposes covered labor organizations to the full scope 
of federal regulation under the Act. Taken as a whole, the Department's 
2003 policy shift lacks consistency and coherence. For example, the 
Department's 2003 policy shift resulted in the coverage of wholly 
public sector intermediate bodies, although not wholly public sector 
international or local unions. Upon reconsideration, the proper balance 
between the goals of robust union transparency and limited regulation 
of public sector unions should not result in an illogical dichotomy 
between types of public sector labor unions or reporting burdens that 
hinge solely on the particular tier a public sector union is placed. 
The Department now concludes that when enlarged coverage for more 
expansive transparency is balanced with the emphasis on minimizing 
regulatory burdens on unions representing exclusively public sector 
employees, it is not the better policy alternative.
    The Department noted as an additional justification for its 2003 
policy shift that labor organizations' structural and financial 
complexity has increased in recent decades, and this complexity 
supported the expansion of coverage. 72 FR at 3738. The district court 
reviewing the Department's policy rationales described this explanation 
as ``entirely a make-weight.'' 539 F.Supp. 2d at 384. Indeed, upon 
reexamination, the Department's theory that local union members not 
only need to, but want to, ``ascertain[] the endpoint of his or her 
dues cast into the stream of affiliate expenditures'' in order to 
assure financial regularity, id., overstates the ends to which one must 
go to sustain labor organization transparency and accountability. There 
has been no clear indication that such meticulous tracing of individual 
membership dues ``in the stream of expenditures'' is required to 
understand a labor organization's financial state.
    In support of the 2003 policy shift, and in part to address the 
congressional concern that wholly public sector unions be excluded from 
the Act, the Department provided data that traced ``to the endpoint'' 
dues of local union members employed in the private sector to their 
locals' national affiliate and back to the newly covered public sector 
intermediate affiliates. These data purportedly strengthened the 
tenuous link between undisputedly covered labor organizations 
representing employees in the private sector and their public sector 
intermediate affiliates. Thus, the Department's expansion of coverage 
was justified to require ``the disclosure of assets and expenditures of 
intermediate labor bodies whose funds are derived, at least in part, 
from private sector employees.'' 72 FR at 3739. Furthermore, the 
Department intended that this tracing of money would illustrate that 
``the so-called `wholly public sector' intermediate body loses that 
attribute to a great extent (despite its composition) when it is 
subordinate to, and accepting contributions from, covered national and 
international labor organizations whose funds are derived, in part, 
from employees in the private sector.'' 72 FR at 3737.
    In justifying the 2003 policy choice, the Department examined the 
incoming local membership contributions and outgoing disbursements of 
only two national labor organizations to conclude, as a broad 
proposition, that all public sector intermediate affiliates subordinate 
to a covered national or international labor organization should be 
covered. In one of the two cases, the money distributed by the national 
labor organization to the state affiliate was minute--just $15,000--as 
compared to both the disbursing national's and the receiving state 
affiliate's multimillion dollar budgets. The second national labor 
organization examined collected dues from local affiliates representing 
employees in the private sector and then routinely made disbursements 
to many of its state affiliates. However, that union subsequently 
implemented measures to keep private sector dues money in a separate 
segregated fund that is not disbursed to wholly public sector 
intermediate bodies. Any meaningful link between the union's private 
sector funds and the financial operations of its public sector 
intermediate bodies, at first somewhat tenuous and theoretical, is now 
remote. The Department would not, of course, base this proposed rule on 
the current (and perhaps temporary) practices of a single union. The 
original rule, however, was based on only two examples concerning the 
flow of money in two unions.
    Where a rulemaking is to be supported by data, and those data are 
offered as proof of a problem, weakness and deficiencies in the data 
cast doubt on the necessity of the asserted policy. As a result, a 
second look at the data relied upon by the Department to bolster its 
2003 interpretative change appears not to support the conclusion that 
``following dues to their endpoint'' justifies ``the so-called `wholly 
public sector' intermediate body'' losing that attribute, thus 
warranting the expansion of LMRDA coverage undertaken by the Department 
in 2003. Rather, the Department concludes that the stated concern 
should be sustained only if an

[[Page 5464]]

analysis of a broader array of national and international labor 
organizations, which have both local members employed in the private 
sector and state affiliates composed of members in the public sector, 
reflects more than a de minimis financial association between the two. 
We now believe that the data upon which the Department relied in its 
2007 Policy Statement do not adequately demonstrate such an 
association.
    A second look at the ``dues endpoint'' theory and data also 
indicates that the 2003 coverage expansion is overly broad. Despite the 
stated rationale that the coverage expansion was justified by following 
membership dues from local union members in the private sector to state 
affiliates, the change in interpretation would result in significant 
and costly reporting obligations on some public sector intermediate 
bodies that may not receive any private-sector membership dues from 
their national affiliate. This overbreadth problem is clear as it 
pertains to the national labor organizations examined by the Department 
in its policy statement, which have state affiliates that receive no 
disbursements from the national organization but which would 
nevertheless be required to submit annual financial reports. In 
addition, the overly broad result may well pertain to other 
intermediate labor organizations that were not the subject of the 
Department's purported empirical analysis and that do not receive 
disbursements from their national affiliate or, if they do, such 
disbursements may not be derived from dues of local members employed in 
the private sector.
    As noted above, given the nature of the data presented, the scope 
of the private-sector-dues-to-public-affiliate scenario may be de 
minimis, and the fix undertaken to address it appears burdensome and 
overbroad Alabama Education, 539 F.Supp.2d at 385. In this new light, 
the Department proposes a return to its prior interpretation regarding 
the statutory criteria governing the coverage of intermediate bodies. 
The Department invites comments on this proposal.

VIII. Regulatory Procedures

Executive Order 12866

    This proposed rule has been drafted and reviewed in accordance with 
Executive Order 12866, section 1(b), Principles of Regulation. In the 
Paperwork Reduction Act (PRA) analysis below, the Department estimates 
that the proposed rule will result in a total burden on labor unions of 
less than $3 million. In addition, we believe that the elimination of 
the Form T-1 reporting requirements will significantly reduce 
compliance costs for labor organizations. In our 2008 final rule, for 
example, we estimated that the projected total cost on filers in the 
first year would be over $15 million in the first year and at least $8 
million in subsequent years. This rule is a significant regulatory 
action and was reviewed by the Office of Management and Budget.

Unfunded Mandates Reform

    This proposed rule will not include any Federal mandate that may 
result in increased expenditures by State, local, and tribal 
governments, in the aggregate, of $100 million or more, or in increased 
expenditures by the private sector of $100 million or more.

Small Business Regulatory Enforcement Fairness Act of 1996

    This proposed rule is not a major rule as defined by section 804 of 
the Small Business Regulatory Enforcement Fairness Act of 1996. This 
rule will not result in an annual effect on the economy of $100,000,000 
or more; a major increase in costs or prices; or significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of the United States-based companies to 
compete with foreign-based companies in domestic and export markets.

Executive Order 13132 (Federalism)

    The Department has reviewed this proposed rule in accordance with 
Executive Order 13132 regarding federalism and has determined that the 
proposed rule does not have federalism implications. Because the 
economic effects under the rule will not be substantial for the reasons 
noted above and because the rule has no direct effect on states or 
their relationship to the federal government, the rule does not have 
``substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.''

Analysis of Costs for Paperwork Reduction Act and Regulatory 
Flexibility Act

    In order to meet the requirements of the Regulatory Flexibility Act 
(RFA), 5 U.S.C. 601 et seq., Executive Order 13272, and the PRA, 44 
U.S.C. 3501 et seq., and the PRA's implementing regulations, 5 CFR Part 
1320, the Department has undertaken an analysis of the financial 
burdens to covered labor organizations associated with complying with 
the requirements contained in this proposed rule. The focus of the RFA 
and Executive Order 13272 is to ensure that agencies ``review rules to 
assess and take appropriate account of the potential impact on small 
businesses, small governmental jurisdictions, and small organizations, 
as provided by the [RFA].'' Executive Order 13272, Sec. 1. The more 
specific focus of the PRA is ``to reduce, minimize and control burdens 
and maximize the practical utility and public benefit of the 
information created, collected, disclosed, maintained, used, shared and 
disseminated by or for the Federal government.'' 5 CFR 1320.1.
    Compliance with the requirements of this proposed rule involves 
essentially information recordkeeping and information reporting tasks. 
Therefore, the overall impact to covered labor organizations, and in 
particular, to small labor organizations that are the focus of the RFA, 
is essentially equivalent to the financial impact to labor 
organizations assessed for the purposes of the PRA. As a result, the 
Department's assessment of the compliance costs to covered labor 
organizations for the purposes of the PRA is used as a basis for the 
analysis of the impact of those compliance costs to small entities 
addressed by the RFA. The Department's analysis of PRA costs, and the 
quantitative methods employed to reach conclusions regarding costs, are 
presented here first. The conclusions regarding compliance costs in the 
PRA analysis are then employed to assess the impact on small entities 
for the purposes of the RFA analysis, which follows.

Paperwork Reduction Act

    This statement is prepared in accordance with the Paperwork 
Reduction Act of 1995, 44 U.S.C. 3501. As discussed in the preamble, 
this proposed rule would implement an information collection that meets 
the requirements of the PRA in that: (1) The information collection has 
practical utility to labor organizations, their members, other members 
of the public, and the Department; (2) the rule does not require the 
collection of information that is duplicative of other reasonably 
accessible information; (3) the provisions reduce to the extent 
practicable and appropriate the burden on labor organizations that must 
provide the information, including small labor organizations; (4) the 
form, instructions, and explanatory information in the preamble are 
written in plain language that will be understandable by reporting

[[Page 5465]]

labor organizations; (5) the disclosure requirements are implemented in 
ways consistent and compatible, to the maximum extent practicable, with 
the existing reporting and recordkeeping practices of labor 
organizations that must comply with them; (6) this preamble informs 
labor organizations of the reasons that the information will be 
collected, the way in which it will be used, the Department's estimate 
of the average burden of compliance, the fact that reporting is 
mandatory, the fact that all information collected will be made public, 
and the fact that they need not respond unless the form displays a 
currently valid OMB control number; (7) the Department has explained 
its plans for the efficient and effective management and use of the 
information to be collected, to enhance its utility to the Department 
and the public; (8) the Department has explained why the method of 
collecting information is ``appropriate to the purpose for which the 
information is to be collected''; and (9) the changes implemented by 
this rule make extensive, appropriate use of information technology 
``to reduce burden and improve data quality, agency efficiency and 
responsiveness to the public.'' 5 CFR 1320.9; see also 44 U.S.C. 
3506(c).

A. Summary of the Rule: Need and Economic Impact

    The following is a summary of the need for and objectives of the 
proposed rule. A more complete discussion of various aspects of the 
proposal is found in the preamble.
    The proposed rule would rescind the Form T-1 Trust Annual Report 
established by final rule on October 2, 2008, and would amend the Form 
LM-2 Labor Organization Annual Report to require unions to include on 
that report information concerning its wholly owned, controlled, and 
financed subsidiary organizations. (Under the Form T-1 reporting 
regime, these subsidiaries would have been included on a Form T-1 
report, rather than on the union's annual report.). The proposed rule 
also would amend the Form LM-3 Labor Organization Annual Report to 
conform its subsidiary organization reporting to those proposed for the 
Form LM-2. Finally, the proposed rule also would return the Department 
to a prior interpretation of the Labor-Management Reporting and 
Disclosure Act (LMRDA), which excludes wholly public sector 
intermediate bodies from coverage under the Act. See section 3(j)(5), 
29 U.S.C. 402(j)(5).
    The LMRDA was enacted to protect the rights and interests of 
employees, labor organizations and the public generally as they relate 
to the activities of labor organizations, employers, labor relations 
consultants, and labor organization officers, employees, and 
representatives. Provisions of the LMRDA include financial reporting 
and disclosure requirements for labor organizations and others as set 
forth in Title II of the Act. See 29 U.S.C. 431-36, 441. Under Section 
201(b) of the Act, 29 U.S.C. 431(b), labor organizations are required 
to file for public disclosure annual financial reports, which are to 
contain information about a labor organization's assets, liabilities, 
receipts, and disbursements.
    The Department has developed several forms to implement the union 
annual reporting requirements of the LMRDA. The reporting detail 
required of labor organizations, as the Secretary has established by 
rule, varies depending on the amount of the labor organization's annual 
receipts. The Form LM-2 Annual Report, the most detailed of the annual 
labor organization reports, and that required to be filed by labor 
organizations with $250,000 or more in annual receipts, must include 
reporting of loans to officers, employees and business enterprises; 
payments to each officer; and payments to each employee of the labor 
organization paid more than $10,000, in addition to other information. 
The Secretary also has prescribed simplified annual reports for smaller 
labor organizations. Form LM-3 may be filed by unions with $10,000 or 
more, but less than $250,000 in annual receipts, and Form LM-4 may be 
filed by unions with less than $10,000 in annual receipts.
    On October 2, 2008, the Department issued a final rule establishing 
the Form T-1 Trust Annual Report, which prescribes the form and content 
of annual reporting by unions concerning entities defined in Section 
3(l) of the LMRDA as ``trusts in which a labor organization is 
interested.'' 73 FR 57412. Prior to the implementation of the Form T-1 
rule, the Department's LMRDA reporting program had not provided for 
separate trust reporting by unions. The objective of this proposed rule 
is to rescind the Form T-1 Trust Annual Report, as the Department has 
determined that it is overbroad, and not necessary to prevent the 
circumvention and evasion of the Title II requirements. The proposed 
rule also would reinstate a requirement for subsidiary organization 
reporting on Form LM-2.
    The Form T-1 includes the requirement to report subsidiaries of 
labor organizations, which the Department defines as ``any separate 
organization of which the ownership is wholly vested in the reporting 
labor organization or its officers or its membership, which is governed 
or controlled by the officers, employees, or members of the reporting 
labor organization, and which is wholly financed by the reporting labor 
organization.'' See Form LM-3 Instructions, Part X, Labor Organizations 
With Subsidiary Organizations). The Department continues to hold the 
view that reporting all subsidiaries is necessary for members and the 
public to have an accurate understanding of a particular labor 
organization's financial condition. The Department believes that 
without the inclusion of the financial information for all 
subsidiaries, the financial disclosures on the Form LM-2 will be 
incomplete. The subsidiary is an asset of the labor organization, and a 
viewer of the report would not get an accurate understanding of the 
union's finances without the inclusion of the subsidiary. Therefore, 
with the proposed rescission of the Form T-1, the Department also 
proposes to require that labor organizations include with or within 
their Form LM-2 reports information concerning their subsidiary 
organizations.
    Prior to the Department's development of the concept of the trust 
annual report, the Department's regulations required unions to report 
information on subsidiaries on their Form LM-2 reports. This 
requirement was revoked by revisions to the Form LM-2 in 2003. Labor 
Organization Annual Financial Reports, 68 FR 58374 (Oct. 9, 2003). The 
return of subsidiary organizations to the Form LM-2 reporting 
requirements would improve the amount of financial disclosure of such 
entities, as compared to the disclosure provided on the Form T-1, as 
the Form T-1 has no equivalent to the Form LM-2 assets and liabilities 
Schedules 1-10, and the itemization threshold for receipts and 
disbursements on the Form LM-2 is $5,000 while that on the Form T-1 is 
$10,000. Under the proposal, and as the pre-2003 Form LM-2 had long 
required, a union must disclose the financial information of its 
subsidiary to the same level of detail as other funds of the union, 
including details regarding assets and liabilities not required to be 
reported on the Form T-1.
    The Department proposes to make available to Form LM-2 filers two 
options regarding the reporting of their subsidiaries, rather than the 
three options formerly permitted in the pre-2003 Form LM-2 
Instructions. First, the

[[Page 5466]]

Department proposes that a labor union may consolidate its 
subsidiaries' financial information with the union's financial 
information on its Form LM-2 report. Alternatively, the Department 
proposes that a labor union can file, with its Form LM-2 report, a 
regular annual report of the financial condition and operations of each 
subsidiary organization, accompanied by a statement signed by an 
independent public accountant certifying that the financial report 
presents fairly the financial condition and operations of the 
subsidiary organization and was prepared in accordance with generally 
accepted accounting principles. When choosing to file a separate 
accountant's report, the union would be required also to include 
information regarding loans payable and payments to union officers and 
employees in the same detail required by the Form LM-2 instructions on 
the related schedules (Schedules 1, 11, and 12).
    The Department proposes not to reinstate a third option previously 
available on Form LM-2: that of filing a separate Form LM-2 report on 
each subsidiary organization. In the Department's experience, the 
filing of a separate Form LM-2 in addition to the union's primary 
report creates confusion for union members and others viewing the 
reports in that the form is designed for unions, not segregated funds 
and assets. Moreover, a union must file one Form LM-2 report per fiscal 
year, and the filing of multiple forms by a union for its subsidiaries 
creates confusion as to which one is the primary form. While 
consolidation contains some risk of confusion, the Department's 
experience is that combined reports are easier to follow than separate 
reports. This is a particularly appropriate and desirable option for 
some unions with subsidiaries that perform traditional union 
operations, such as strike funds and other special union funds. Thus, 
the Department proposes to preserve this option for Form LM-2 filers.
    To remain consistent with the proposed reporting options available 
for Form LM-2 filers, the Department also proposes to revise the Form 
LM-3 instructions regarding the reporting of subsidiary organizations. 
Form LM-3 filers will have the same two options to report required 
information about subsidiaries as the Form LM-2 filers, and the 
reporting unions' option to file a separate Form LM-3 report on a 
subsidiary organization will likewise be eliminated. Again, this would 
avoid potential confusion for the public and would align the Form LM-3 
subsidiary reporting regime with that proposed for Form LM-2 filers.
    The obligation to report on the Form T-1 constituted an increase in 
reporting burdens for those labor organizations with reportable trusts. 
Given that increase, and as stated more fully below, this proposed rule 
represents a net reduction in the total filing burden for Form LM-2 
filers, as the rescission of the Form T-1 removes the information 
collection burden associated with that form and replaces it with the 
reinstatement of subsidiary organization reporting, which presents only 
a small increase in the total Form LM-2 reporting burden. As 
demonstrated in the 2008 Form T-1 rule, the Form T-1 represented a 
total burden, for the estimated 2,292 Form LM-2 filers affected by the 
rule, of approximately 423,900 hours in the first year and 306,700 in 
the subsequent years. Additionally, the projected total cost on filers 
in the first year was approximately $15.2 million in the first year and 
approximately $8.2 million in subsequent years. 73 FR at 57441 and 
57445. The proposed rule eliminates these burdens and costs from OMB 
1215-0188, although, as discussed below, the reinstatement of 
subsidiary reporting transfers a small portion of this burden to the 
Form LM-2.
    The proposed rule does not add any burden associated with the 
electronic submission of reports. The Department has in place an 
electronic reporting system for use by labor organizations, e.LORS. The 
objectives of the e.LORS system include the electronic filing of 
current Forms LM-2, LM-3, and LM-4, as well as other LMRDA disclosure 
documents; disclosure of reports via a searchable Internet database; 
improving the accuracy, completeness and timeliness of reports; and 
creating efficiency gains in the reporting system. Effective use of the 
system reduces the burden on reporting organizations, provides 
increased information to members of labor organizations, and enhances 
LMRDA enforcement by OLMS. The OLMS Online Public Disclosure site is 
available for public use at www.unionreports.gov. The site contains a 
copy of each labor organization's annual financial report for reporting 
year 2000 and thereafter as well as an indexed computer database of the 
information in each report.
    Filing labor organizations have several advantages with the current 
electronic filing system. With e.LORS, data from the reporting unions' 
electronic records can be directly imported into Form LM-2. Not only is 
entry of the information eased, the software makes mathematical 
calculations and checks for errors or discrepancies. Additionally, any 
attachments to Form LM-2, such as would be required for unions choosing 
to submit a separate independent audit report for their subsidiary 
organizations, could be submitted electronically with the Form LM-2 
reports.
    As discussed in more detail below, there is negligible, if any, new 
information collection burden associated with the minor change proposed 
for the Form LM-3 reporting requirements regarding subsidiary 
organizations, nor is there any information collection associated with 
the proposal to change the Department's interpretation regarding wholly 
public sector intermediate bodies.

B. Overview of Subsidiary Reporting on Form LM-2 and Trust Reporting on 
Form T-1

    Every labor organization whose total annual receipts are $250,000 
or more and those organizations that are in trusteeship must currently 
file an annual financial report using the current Form LM-2, Labor 
Organization Annual Report, within 90 days after the end of the labor 
organization's fiscal year, to disclose their financial condition and 
operations for the preceding fiscal year. The current instructions 
state that the calculation of ``total annual receipts'' does not 
include ``trusts'' (of which the union may be required to file the Form 
T-1, Trust Annual Report), unless the trusts are ``wholly owned, wholly 
controlled, and wholly financed by the labor organizations.'' See Form 
LM-2 Instructions, Part II: What Form to File. Although the current 
Form Instructions do not use the term, the above description refers to 
subsidiary organizations. Presently, Form LM-3 filers must also include 
the assets, liabilities, receipts, and disbursements within the Form 
LM-3 report, and prior to changes made in 2003, the Department required 
Form LM-2 filers to do the same. The current Form LM-2 is also used by 
covered labor organizations with total annual receipts of $250,000 or 
more to file a terminal report upon losing their identity by merger, 
consolidation, or other reason.
    Therefore, unions must currently identify subsidiaries on the Form 
LM-2 in Item 10, Trusts or Funds, and they must calculate the total 
receipts of the subsidiary for purposes of the Form LM-2 filing 
threshold of $250,000. However, there are currently no further Form LM-
2 reporting obligations concerning such subsidiaries. Rather, filers 
must report information on such subsidiaries on the Form T-1. See Form 
LM-2 Instructions Part X, Trusts in

[[Page 5467]]

Which a Labor Organization is Interested.
    The current Form LM-2 consists of 21 questions that identify the 
labor organization and provide basic information (in primarily a yes/no 
format); a statement of 11 financial items on different assets and 
liabilities (Statement A); a statement of receipts and disbursements 
(Statement B); and 20 supporting schedules (Schedules 1-10, Assets and 
Liabilities related schedules; Schedules 11-12 and 14-20, receipts and 
disbursements related schedules; and Schedule 13, which details general 
membership information).
    The Form LM-2 requires such information as: whether the labor 
organization has any trusts (Item 10, including, on the current form 
and instructions, subsidiary organizations); whether the labor 
organization has a political action committee (Item 11); whether the 
labor organization discovered any loss or shortage of funds (Item 13); 
the number of members (Item 20); rates of dues and fees (Item 21); the 
dollar amount for seven asset categories, such as accounts receivable, 
cash, and investments (Items 22-28); the dollar amount for four 
liability categories, such as accounts payable and mortgages payable 
(Items 30-33); the dollar amount for 13 categories of receipts such as 
dues and interest (Items 36-48); and the dollar amount for 16 
categories of disbursements such as payments to officers and repayment 
of loans obtained (Items 50-65).
    Schedules 1-10 requires detailed information and itemization on 
assets and liabilities, such as loans receivable and payable and the 
sale and purchase of investments and fixed assets. There are also nine 
supporting schedules (Schedules 11-12, 14-20) for receipts and 
disbursements that provide members of labor organizations with more 
detailed information by general groupings or bookkeeping categories to 
identify their purpose. Labor organizations are required to track their 
receipts and disbursements in order to correctly group them into the 
categories on the current form.
    The Form T-1 provides similar but not identical reporting and 
disclosure for section 3(l) trusts, currently including subsidiaries, 
of Form LM-2 filing labor organizations. The Form T-1 requires 
information such as: losses or shortages of funds or other property 
(Item 16); acquisition or disposal of any goods or property in any 
manner other than by purchase or sale (Item 17); whether or not the 
trusts liquidated, reduced, or wrote-off any liabilities without full 
payment of principal and interest (Item 18); whether the trust extended 
any loan or credit during the reporting period to any officer or 
employee of the reporting labor organization at terms below market 
rates (Item 19); whether the trust liquidated, reduced, or wrote-off 
any loans receivable due from officers or employees of the reporting 
labor organization without full receipt of principal and interest (Item 
20); and the aggregate totals of assets, liabilities, receipts, and 
disbursements (Items 21-24). Additionally, the union must report 
detailed itemization and other information regarding receipts in 
Schedule 1, disbursements in Schedule 2, and disbursements to officers 
and employees of the trust in Schedule 3.
    Although the Form T-1 has a higher reporting threshold for receipts 
and disbursements than does the Form LM-2, it provides nearly identical 
information regarding receipts and disbursements as does the Form LM-2. 
For example, unions must itemize receipts of trusts with virtually 
identical detail on Form T-1, Schedule 1, as does the Form LM-2 on its 
Schedule 14. Further, the information required on Form T-1 Schedules 2 
and 3 correspond almost directly to the information required on Form 
LM-2 Schedules 15-20 and 11-12, respectively, although the format does 
not directly correlate. However, as discussed earlier, Form T-1 does 
not provide as much detail regarding assets and liabilities of trusts 
as the Form LM-2 requires. For example, although Form T-1 Items 16 and 
17 correspond directly to Form LM-2 Items 13 and 15, and the 
information required in Form T-1 Items 18-20 is required in a different 
format in Form LM-2, Schedules 2 and 8-10, there is also significant 
information required on the Form LM-2 and not on the Form T-1. Chief of 
the material excluded on the Form T-1 is the detailed information 
regarding assets and liabilities required by Form LM-2, Schedules 1-10. 
In sum, under the proposed rule unions would need to report such 
information on the Form LM-2, while they would not need to do so under 
the existing Form T-1. Thus, consolidation of subsidiaries on the Form 
LM-2 provides greater transparency for such entities than does the Form 
T-1.
    Additionally, the Department provided the public with separate 
burden analyses for the Form LM-2 and the Form T-1, in addition to the 
other forms required to be filed with the Department under the LMRDA. 
These analyses include the time for reviewing the respective set of 
instructions, searching existing data sources, gathering and 
maintaining data needed, creating needed accounting procedures, 
purchasing software, and completing and reviewing the collection of 
information. This proposed rule eliminates the need for a Form T-1 
burden analysis, as it proposes to eliminate that form and its separate 
reporting regime. The proposed rule also amends the reporting 
requirements for the Form LM-2 to bring subsidiary reporting back into 
its reporting regime, but it does not establish a new reporting regime. 
Thus, many of the areas analyzed in other LMRDA reporting and 
disclosure burden analyses are not relevant to this discussion, as the 
existence and basic structure and procedures of the present Form LM-2 
reporting regime is not amended by this proposed rule.
    Finally, for the purposes of the analysis below, the following is a 
brief discussion of the similarities and differences between subsidiary 
organizations and other entities included within the Form T-1 reporting 
regime, which demonstrates that data used for evaluating the burden of 
the Form T-1 may also be used in evaluating the burden of reporting on 
subsidiary organizations on the Form LM-2. As stated in the preamble, 
subsidiary organizations are entities wholly owned, controlled, and 
financed by a union, and the Department estimates that they constitute 
at least one third of ``trusts'' included within the Form T-1 reporting 
regime. These subsidiaries include entities such as strike funds and 
building corporations, and they also include other entities unrelated 
to typical union functions. Other entities included within the Form T-1 
include Taft-Hartley funds, which are funded by an employer pursuant to 
a collective bargaining agreement and established and managed jointly 
between union(s) and employer(s). The latter includes apprenticeship 
and training funds. Although the entities within the reporting regime 
of the Form T-1 often differ widely in terms of their structure 
(including within the subsidiary category itself), subsidiaries and 
Taft-Hartley funds share many characteristics in this area, such as 
size, number of officers and employees, assets, liabilities, receipts, 
and disbursements. As such, although subsidiaries often differ from 
Taft-Hartley funds in terms of function and certainly in management, 
they also often have commonalities in areas such as structure and 
typical reporting and disclosure categories.

[[Page 5468]]

C. Methodology for the Burden Estimates \10\
---------------------------------------------------------------------------

    \10\ Some of the burden numbers included in both this PRA 
analysis and regulatory flexibility analysis will not add perfectly 
due to rounding.
---------------------------------------------------------------------------

    Initially, as stated above, this notice proposes an overall 
reduction of burden hours for Form LM-2 filers. The Department proposes 
to rescind the Form T-1, which would result in a reduction of 
423,913.74 burden hours in the first year and 306,736.92 in the 
subsequent years that an estimated 2,292 Form LM-2 filers would incur. 
Additionally, the total cost to filers was projected to be 
$15,186,874.46 in the first year and $8,168,474.74 in subsequent years. 
73 FR at 57441 and 57445. However, the reinstatement of the subsidiary 
organization reporting requirement on the Form LM-2 does transfer a 
portion of the Form T-1 reporting burden to the Form LM-2, as discussed 
more fully below. The Department has employed much of the burden 
analysis used in the Form T-1 cost estimates as a basis for its 
determination of the additional subsidiary organization burden here, 
although, as noted above, not all aspects of such analysis are relevant 
to the consolidation of subsidiaries on the Form LM-2, nor do the Form 
T-1 and Form LM-2 reporting regimes correspond directly to one another. 
Those places in which the analysis from the 2008 Form T-1 rule is 
modified or not used are noted.
    Further, the changes proposed to the Form LM-3 reporting 
requirements, which currently require subsidiary reporting, do not 
result in any significant increase or decrease to the burden for those 
filers. As stated above, Form LM-3 filers currently have three options 
in which to report on their subsidiaries: (1) Consolidate all financial 
transactions on one Form LM-3; (2) file a separate Form LM-3 for each 
subsidiary organization; or (3) attach an audit to the Form LM-3, 
prepared in accordance with the Form LM-3 Instructions for each 
subsidiary. In the Department's experience, a substantial majority of 
Form LM-3 filers with subsidiary organizations elect to file a 
consolidated Form LM-3, with few choosing either of the other options. 
Additionally, the burden for filing a separate LM-3 is virtually 
identical to consolidating the information on one report. The 
Department, therefore, does not believe the removal of the option to 
file separate LM-3s for each subsidiary organization results in a 
change to the filing burden for Form LM-3 filers.
    In reaching its estimates regarding the burden on Form LM-2 filers 
to consolidate information regarding their subsidiary organizations, 
the Department considered the recurring costs associated with the 
proposed rule. Additionally, the Department used the Form T-1 cost and 
burden estimates as the basis for the estimates for consolidating 
subsidiary organization information on the Form LM-2 (73 FR 57436-
57445). As stated above, although subsidiary organizations represent 
only a portion of the Form T-1 universe, and they differ from Taft-
Hartley funds and other trusts in their function and management, the 
Department believes that the similarity in the make-up of the 
organizations and the similar level of reporting of receipts and 
disbursements required by the Form T-1 and Form LM-2, justify the use 
of Form T-1 estimates. However, there are differences between Form T-1 
reporting and consolidating subsidiary organization financial 
information on the Form LM-2, and the analysis below will address 
these.
    Additionally, the Department's labor cost estimates reflect the 
Department's assumption that the labor organizations will rely upon the 
services of some or all of the following positions (either internal or 
external staff): The labor organization's president, secretary-
treasurer, accountant, and bookkeeper. In the 2008 Form T-1 rule, the 
salaries for these positions are measured by wage rates published by 
the Bureau of Labor Statistics or derived from data reported in e.LORS.
1. Number of Subsidiary Organizations
    The Department estimates that Form LM-2 filers have approximately 
1,187 subsidiary organizations. This number derives from a review of 
Form LM-2 reports filed in 2004, the final year in which filers were 
required to identify on Item 10 whether they had a subsidiary 
organization. A review of these reports indicated that 1,087 Form LM-2 
filers indicated that they had at least one subsidiary organization. In 
the Department's experience, generally about half of the 100 largest 
labor organizations have multiple subsidiary organizations, with the 
remainder of all filers with such organizations having only one of 
them. In the Department's experience, these 50 of the largest labor 
organizations that have multiple subsidiary organizations have on 
average approximately two additional subsidiary organizations, for a 
total of three subsidiaries. Therefore, the Department added 100 (2 
subsidiaries x 50 labor organizations) to the 1,087 filers indicating 
that they had at least one subsidiary organization, for a total 
estimate of 1,187 subsidiaries.\11\
---------------------------------------------------------------------------

    \11\ These figures differ from the Department's estimates in the 
Form T-1 analysis. See 73 FR 57441. In the Form T-1 analysis, the 
Department estimated 2,292 Form LM-2 filers would submit a Form T-1 
based upon an analysis of those filers who indicated on their 2006 
report that they had at least one LMRDA section 3(l) trust. In this 
NPRM, the Department derives its estimate of the number of Form LM-2 
filers with subsidiaries directly from the number of Form LM-2 
filers who indicated on their 2004 Form LM-2 reports that they had a 
subsidiary organization. The number of Form LM-2 filers with 
subsidiaries is smaller than the number of LM-2 filers with section 
3(l) trusts because the definition of section 3(l) trusts includes 
more entities than the definition of subsidiaries.
---------------------------------------------------------------------------

2. Hours To Complete and File a Consolidated Form LM-2: Reporting and 
Recordkeeping
    Initially, the Department considered the issue of non-recurring 
burden hours associated with Form LM-2 subsidiary reporting, but it 
believes that burdens such as those associated with reviewing the Form 
LM-2 instructions, training staff, acquiring the necessary software to 
complete and submit the form, and similar up-front burdens, do not 
exist separately with subsidiary organization reporting. Therefore, 
unlike with the Form T-1, there are no non-recurring burdens associated 
with subsidiary organization reporting; only recurring ones. These 
burdens are already included in the Form LM-2 burden estimate, and the 
similar burdens related to the Form T-1 would be rescinded by this 
proposed rule (See Form T-1 final rule, Table 5, 73 FR 57444). Further, 
many recurring burdens and tasks, such as those analyzed in the Form T-
1 analysis, are also not included in this analysis, because they did 
not relate to the Form LM-2 requirements or are already accounted for 
in the Form LM-2 burden analysis. For example, the basic labor 
organization identifying information, Items 1-68, and the summary 
statements are accounted for in the existing Form LM-2 burden analysis. 
Therefore, this analysis focuses on additional costs necessary to 
consolidate subsidiary organization information on the filer's existing 
Form LM-2.
    Additionally, the estimated reporting and recordkeeping burden 
hours for those filers who choose to undertake an audit are 
substantially the same as those who consolidate the data on their Form 
LM-2, as the detail required for the audit is congruent with the Form 
LM-2 requirements. Accordingly, the Department has analyzed below the 
costs associated with consolidated reporting, and assumes as part of 
its conclusion that the costs of the audit

[[Page 5469]]

option are no greater than those costs associated with consolidated 
reporting.
a. Recordkeeping Burden Hours To Complete Schedules for Assets, 
Liabilities, Receipts, Disbursements, and Officers and Employees 
Schedules
    The Department has recently estimated the recordkeeping burden 
associated with the number of disbursements, receipts, officers, and 
employees of trusts in the 2008 Form T-1 rule. (73 FR 57440-57445). The 
Department assumes that the recordkeeping tasks associated with 
gathering information required for the Form T-1 are essentially the 
same as those tasks associated with gathering the necessary information 
for subsidiary reporting proposed here. For instance, as explained 
above, although the Form T-1 uses a different format and requires 
reporting at a higher threshold than the Form LM-2, the Form T-1 
receipts schedule, Schedule 1, corresponds to Form LM-2 Schedule 14; 
the Form T-1 general disbursements Schedule 2 corresponds to Form LM-2 
Schedules 15-20; and the Form T-1 officer and employee disbursements 
Schedule 3 corresponds to Form LM-2 Schedules 11-12. As a result, the 
Department has employed here the burden hours it concluded were 
associated with Form T-1 recordkeeping for these categories. For the 
categories of assets and liabilities, the Form T-1 has no schedules, 
while the Form LM-2 does provide for reporting these categories in its 
Schedules 1-10. However, the Department does not believe there is any 
new recordkeeping burden for these schedules, because unions would 
already maintain this subsidiary information in the accounting systems 
used to electronically complete the existing schedules for assets and 
liabilities not associated with the subsidiary. See 68 FR at 58439 (no 
recurring burden for assets and liabilities in revised Form LM-2 where 
schedule and software unchanged). Accordingly, the Department concludes 
that a Form LM-2 filer keeping records necessary to report a subsidiary 
organization will spend 5.49 additional hours compiling information 
regarding receipts, 54.15 hours compiling information on general 
disbursements, and 10.07 hours compiling information to report on 
disbursements to officers and employees. See 73 FR at 57442 
(specifically analyzing those recordkeeping tasks for the Form T-1). 
The total number of hours for recordkeeping tasks is reflected below in 
Table 1; see also 73 FR 57443.
    The Form T-1 analysis was based in part on a randomly selected 
subset of the 2,292 Form LM-2 filers in 2006 that indicated an interest 
in at least one trust. That analysis has been adapted here for use in 
analyzing reporting on subsidiaries as opposed to trusts, and includes 
calculations estimating the recordkeeping burden for receipts 
(corresponding to Form T-1 Schedule 1; Form LM-2 Schedule 14), general 
disbursements (corresponding to Form T-1 Schedule 2; Form LM-2 
Schedules 15-20), and disbursements to officers and employees 
(corresponding to Form T-1 Schedule 3; Form LM-2 Schedules 11-12). 
Based on that analysis, the Department has derived the information-
compilation hours noted above (5.49 hours for receipts, 54.15 hours for 
general disbursements, and 10.07 hours for officer and employee 
disbursements) in a similar manner, as follows:

    The Department estimates that, on average, consolidated Form LM-
2 filers will expend 5.49 hours a year on recordkeeping to document 
the information necessary to complete the Form LM-2 receipts 
schedule 14. Based on the random sample of labor organizations with 
an interest in at least one trust outlined above, Form LM-2 filers 
on average itemize 11 receipts on Schedule 14 (other receipts). The 
remaining receipts are reported as aggregates in 12 separate 
categories on Statement B (cash receipts): dues, per capita tax, 
fees, sales of supplies, interest, dividends, rents, sales of 
investment and fixed assets, loans, repayment of loans, receipts 
held on behalf of affiliates for transmission to them, and receipts 
from members for disbursement on their behalf. The Department does 
not believe subsidiaries will have receipts from per capita taxes or 
that they will they hold money for members and affiliates. For the 
Form T-1, the Department stated that, on average, trusts will 
itemize 109.86 receipts each year as estimated for the Form T-1. 
Experience with the Form LM-2 indicates that a labor organization 
can input all the necessary information on an itemized receipt in 3 
minutes. The total number of itemized receipts, 109.86, was 
multiplied by 3 minutes to reach the yearly recordkeeping burden, 
5.49 hours.\12\
---------------------------------------------------------------------------

    \12\ This number differs slightly from the 5.43 hours used in 
the Form T-1 analysis (73 FR 57442) due to a rounding error in that 
analysis.
---------------------------------------------------------------------------

    For the Form LM-2 disbursement schedules (Schedules 15-20), the 
Department estimates that, on average, consolidated filers will 
expend 54.15 hours a year on recordkeeping. The average Form LM-2 
has 1,083 itemized disbursements. Like receipts, the Department 
estimates it will take 3 minutes to input all the necessary 
information on an itemized disbursement. The total number of 
itemized disbursements, 1,083, was multiplied by 3 minutes to reach 
the yearly recordkeeping burden, 54.15 hours.\13\
---------------------------------------------------------------------------

    \13\ This number differs slightly from the 54.13 hours used in 
the Form T-1 analysis (73 FR 57442) due to a rounding error in that 
analysis.
---------------------------------------------------------------------------

    Regarding the officer and employee schedules (Schedules 11-12), 
the Department estimates consolidated Form LM-2 filers will expend 
10.07 hours on recordkeeping to compile the information necessary to 
complete these schedules, as Form T-1 Schedule 3 is virtually 
identical to Form LM-2 Schedules 11-12. The Department based its 
estimate on the analysis used in the 2008 Form T-1 PRA analysis, as 
the rule required unions to file Form T-1 reports for subsidiaries, 
and the Department believes, as explained previously, that the 
filing burden for subsidiaries greatly resembles that of the burden 
for filing a Form T-1 for trusts. Specifically, similar to the Form 
T-1 analysis, a union will not have to increase recordkeeping for 
officers of subsidiaries, as they are already required to keep 
records on its officers and key employees (including those of the 
subsidiary) for the IRS Form 990, including name, address, current 
position, salary, fees, bonuses, severance payments, deferred 
compensation, allowances, and taxable and nontaxable fringe 
benefits. (See 73 FR 57440-42).
    Additionally, the Department determined, consistent with the 
2008 Form T-1 burden analysis and its Form LM-2 sample, that Form 
LM-2 filers have, on average, 21.57 employees. The Department 
assumes that subsidiaries will have a comparable number of 
employees, although in practice subsidiaries, such as strike funds 
and building corporations may have considerably fewer. Nevertheless, 
subsidiaries, as part of unions and thus functioning in certain 
purposes as employers, keep wage records for each of their 
employees. The filers will also have to begin keeping records on 
non-key employees. Id.

    Finally, for the assets and liabilities schedules (Form LM-2 
Schedules 1-10), reporting in these categories was not required for the 
Form T-1. As explained above, the Department does not believe there is 
any new recordkeeping burden for these schedules, as subsidiaries 
already maintain this information as accounts receivable, accounts 
payable, and investments.
b. Reporting Burden Hours for Data Input
    As with the recordkeeping burden above, the Department concludes 
that the number of hours required for data input for subsidiary 
reporting on the Form LM-2 is substantially the same as the number of 
hours required for data input for the Form T-1, which was assessed in 
the 2008 Form T-1 rule. 73 FR at 57442. In its 2008 Form T-1 rule, the 
Department estimated that Form T-1 filers will spend 3.75 reporting 
hours on each schedule inputting the data. As stated in that analysis, 
experience with the Form LM-2 in previous rulemakings indicates that 
labor organizations will spend, for each type of reporting (i.e. 
receipts; general disbursements; officer and employee

[[Page 5470]]

disbursements), 15 minutes a year training new staff, 60 minutes 
preparing the download, 90 minutes preparing and testing the data file, 
and 60 minutes editing, validating and importing the data.
    In this analysis, the Department has removed the 15 minutes of 
additional training each year from its estimate, because this extra 
training is already accounted for in the existing Form LM-2 burden and 
information relating to the subsidiary is entered on the Form in the 
same manner as any other asset. However, as in the Form T-1 analysis, 
the Department estimates that Form LM-2 filers will spend 3.5 hours 
inputting data for receipts (on Form LM-2, Schedule 14, which 
corresponds to Form T-1, Schedule 1); officer and employee 
disbursements (on Form LM-2, Schedules 11-12, which correspond to Form 
T-1, Schedule 3); the remaining disbursements (on Form LM-2, Schedules 
15-20, which correspond to Form T-1, Schedule 2); as well as for the 
assets and liabilities schedules (on Form LM-2, Schedules 1-10, 
although the Form T-1 has no counterpart). Additionally, as in the Form 
T-1 analysis, the Department also estimates that the president and 
treasurer of the Form LM-2 filing union will each spend two extra hours 
reviewing the form to ensure the accuracy of the consolidated 
subsidiary information before signing. See 73 FR 57444. These figures 
are shown below in Table 2.
    The Department also removed other reporting categories used in 
Table 3 of the Form T-1 burden analysis (73 FR 57443), because they did 
not relate the Form LM-2 requirements or are already included in the 
Form LM-2 reporting regime and accounted for separately. These 
categories include: Fill out trust/labor organization information; 
answer questions; fill in assets, liabilities, disbursements and 
receipts; additional information; and signature.
c. Total Hours Spent on Recordkeeping and Reporting
    As discussed above, and as reflected in the following tables, the 
Department estimates that, in addition to the existing burden to 
complete the Form LM-2 as calculated in the 2003 Form LM-2 Final Rule, 
68 FR at 58436-40, Form LM-2 filers will expend, on average, 69.71 
hours per year on recordkeeping per subsidiary organization and 18.00 
hours on reporting.

   Table 1--Recordkeeping Burden in Hours per Subsidiary Organization
------------------------------------------------------------------------
                                                              Total
                                     Schedule or item     recordkeeping
             Schedule                  description         burden (in
                                                             hours)
------------------------------------------------------------------------
Schedules 1-10...................  Assets and                       0.00
                                    Liabilities
                                    Schedules.
Schedule 14......................  Individually                     5.49
                                    itemized receipts.
Schedules 15-20..................  Individually                    54.15
                                    itemized
                                    disbursements.
Schedule 11 and 12...............  Disbursements to                10.07
                                    Officers and
                                    Employees of
                                    subsidiary.
------------------------------------------------------------------------
    Total Recordkeeping Burden Hours per Subsidiary                69.71
     Organization.
------------------------------------------------------------------------


                        Table 2--Reporting Burden in Minutes per Subsidiary Organization
----------------------------------------------------------------------------------------------------------------
                                                                                  Edit/validate/       Total
           Schedule             Schedule or item      Prepare     Preparation of    import data      reporting
                                   description       download     test/data file       file           burden
----------------------------------------------------------------------------------------------------------------
Schedules 1-10................  Assets and                    60              90              60             210
                                 Liabilities
                                 Schedules.
Schedule 14...................  Individually                  60              90              60             210
                                 itemized
                                 receipts.
Schedules 15-20...............  Individually                  60              90              60             210
                                 itemized
                                 disbursements.
Schedule 11 and 12............  Disbursements to              60              90              60             210
                                 Officers and
                                 Employees of
                                 subsidiary.
                                Management        ..............  ..............  ..............             240
                                 Review.
----------------------------------------------------------------------------------------------------------------
    Total Burden per Subsidiary Organization....             240             360             240            1080
================================================================================================================
    Total Burden Hours per Subsidiary                       4.00            6.00            4.00           18.00
     Organization.
----------------------------------------------------------------------------------------------------------------

3. Cost of Personnel To Report Subsidiary Organization Financial 
Information on the Form LM-2
    As in the Form T-1 analysis (73 FR 57443-45), the Department 
assumes that, on average, the completion by a labor organization of a 
consolidated Form LM-2 will involve an accountant/auditor, bookkeeper/
clerk, labor organization president and labor organization treasurer. 
Based on the 2008 Bureau of Labor Statistics (BLS) wage data from its 
Occupational Employment Statistics Survey, accountants earn $34.74 per 
hour and bookkeepers/clerks earn $15.88 per hour.\14\ The Department 
also increased each of these figures by 43.0% to account for total 
compensation.\15\ See Table 3 below.
---------------------------------------------------------------------------

    \14\ See Occupational Employment and Wages Survey. 2008, survey, 
Table 6, from the Bureau of Labor Statistics (BLS), Occupational 
Employment Statistics (OES) Program; http://www.bls.gov/
news.release/pdf/ocwage.pdf. The Form T-1 analysis utilized data 
from the 2007 survey, while this proposed rule has updated the data 
with the use of the 2008 survey.
    \15\ See Employer Costs for Employee Compensation Summary, from 
the BLS, at http://www.bls.gov/news.release/ecec.nr0.htm. The 
Department updated the total hourly compensation figures from the 
Form T-1 analysis (30.2% to 43.0%), in that it uses 2008 rather than 
2007 numbers, and it increased the hourly wage rate by the 
percentage total of the average hourly compensation figure ($8.90 in 
2008) over the average hourly wage ($20.49 in 2008).
---------------------------------------------------------------------------

    As in the Form T-1 analysis, the Department estimates the average 
annual salaries of labor organization officers needed to complete tasks 
for compliance with this rule--the president and treasurer--from 
responses to salary inquiries based on a sample of 205 labor 
organizations that filed a Form LM-2 in 2006 and indicated an interest 
in at least one section 3(l) trust. Because the Department assumes 
significant commonality between those labor organizations that would 
have reported on trust interests under the Form T-1

[[Page 5471]]

rule and those labor organizations that will report on subsidiaries 
under Form LM-2, the Department has employed here the salary data for 
labor organization President and Treasurer utilized in the Form T-1. 
The Form T-1 study determined that in 2006 Form LM-2 labor organization 
presidents with section 3(l) trusts make, on average, $24.89 an hour 
and treasurers $31.58. The average annual salaries were determined by 
multiplying the average hourly wage by the number of hours in a year, 
based on a standard 40-hour work week (40 x 52 = 2,080 hours). The 
average hourly wage was then multiplied by the same 43.0% to reach 
$35.59 per hour and $45.16 per hour, for presidents and treasurers, 
respectively. See Table 3 below.

                    Table 3--Compensation Cost Table
------------------------------------------------------------------------
                                       Total hourly       Total hourly
               Title                       wage           compensation
------------------------------------------------------------------------
Accountants/Auditors..............             $34.74             $49.68
Bookkeepers/Clerks................              15.88              22.71
President.........................              24.89              35.59
Treasurer.........................              31.58              45.16
------------------------------------------------------------------------

    Once the labor costs were calculated, the Department applied those 
costs to each of the Form LM-2 tasks computed in the previous section. 
Each task was evaluated separately to determine which individual from a 
particular job category would be needed to complete the task. All tasks 
identified by the Department above as necessary for compliance with the 
requirements of this rule were analyzed to determine which personnel 
would conduct those tasks. As stated previously, the Department removed 
tasks associated with the Form T-1 burden analysis that do not 
correlate to a task needed to consolidate subsidiary information on the 
Form LM-2, or are otherwise accounted for in the pre-existing Form LM-2 
reporting regime and its burden (See Form T-1 final rule, Table 5, 73 
FR 57444). The following table presents this analysis.

                Table 4--Cost by Task for Subsidiary Organization Consolidation on the Form LM-2
----------------------------------------------------------------------------------------------------------------
                                                 Individuals                         Hours to
         Burden type                Task        participating     Hourly cost        complete          Cost
----------------------------------------------------------------------------------------------------------------
Recordkeeping...............  Input Records..  Bookkeeper.....  $22.71.........  69.71..........       $1,583.11
Reporting...................  Prepare          Bookkeeper.....  $22.71.........  4.00...........           90.84
                               Download.
Reporting...................  Preparation of   Accountant.....  $49.68.........  6.00...........          298.08
                               Test/Data File.
Reporting...................  Edit/Validate/   Accountant.....  $49.68.........  4.00...........          298.08
                               Import Data
                               File.
Reporting...................  Management       President and    $35.59 and       4.00 (2 hours            161.50
                               Review.          Treasurer.       $45.16.          each).
----------------------------------------------------------------------------------------------------------------
    Total Recordkeeping and Reporting Burdens Hours and Costs..................  87.71..........        2,431.61
----------------------------------------------------------------------------------------------------------------

4. Calculation of Total Costs To Form LM-2 Labor Organizations With a 
Subsidiary Organization
    Based on the analysis reflected in the table above, the average 
cost per labor organization to consolidate its subsidiary's financial 
information on its Form LM-2 is $2,431.61. As noted earlier, the 
Department has employed here many of the assumptions about 
recordkeeping and reporting burdens from the cost analysis in the Form 
T-1 Final Rule, because the two reporting regimes have many 
similarities. However, subsidiaries of smaller unions will not have as 
many officers, employees, receipts, or disbursements as the 
subsidiaries of larger unions. As a result, the Department views the 
burden estimate developed here as somewhat more generous than it will 
likely be in actuality.
    Additionally, based upon experience, the Department estimates that 
10% of filers will submit an audit rather than consolidate on its Form 
LM-2. For these filers, the Department estimates that the reporting and 
recordkeeping burden, as well as the total cost, will be virtually 
identical to filers who choose to consolidate, as the same information 
and level of detail is required for both options. However, the 
Department understands that the accountant who prepares a separate 
audit will not engage in the three separate reporting activities 
(prepare download, prepare data file, and edit import file). Rather, he 
or she will conduct an analysis of the records and create an audit 
report. Nevertheless, the Department believes that the reporting burden 
associated with preparing an audit report will be virtually identical 
to that of the reporting burden associated with consolidating such 
information on the Form LM-2. As a result, the Department estimates 
that the audit option will also cost Form LM-2 filers $2,431.61.
    Based upon an estimate of 1,187 total subsidiaries for Form LM-2 
filers, the Department estimates that the total cost for Form LM-2 
subsidiary reporting is $2,886,321.07. These results are reflected in 
the table below.

[[Page 5472]]



                       Table 5--Reporting and Recordkeeping Burden Hours and Costs for Form LM-2 Subsidiary Organization Reporting
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Recordkeeping        Total         Total burden
   Number of     Reporting hours  Total reporting     hours per      recordkeeping      hours per       Total burden     Average cost      Total cost
  subsidiaries    per subsidiary       hours          subsidiary         hours          subsidiary         hours        per subsidiary
--------------------------------------------------------------------------------------------------------------------------------------------------------
         1,187            18.00           21,366            69.71        82,745.77            87.71       104,111.77        $2,431.61     $2,886,321.07
--------------------------------------------------------------------------------------------------------------------------------------------------------

5. Request for Public Comment
    Currently, the Department is soliciting comments concerning the 
information collection request (``ICR'') for the information collection 
requirements included in this proposed regulation at section 403.2, 
Annual financial report, of title 29, Code of Federal Regulations, 
which, when implemented will revise the existing OMB control number 
1215-0188. A copy of this ICR, with applicable supporting 
documentation, including among other things a description of the likely 
respondents, proposed frequency of response, and estimated total burden 
may be obtained from the RegInfo.gov Web site at http://
www.reginfo.gov/public/do/PRAMain or by contacting Darrin King on 202-
693-4129 (this is not a toll-free number)/e-mail: king.darrin@dol.gov. 
Please note that comments submitted in response to this notice will be 
made a matter of public record.
    The Department hereby announces that it has submitted a copy of the 
proposed regulation to the Office of Management and Budget (``OMB'') in 
accordance with 44 U.S.C. 3507(d) for review of its information 
collections. The Department and OMB are particularly interested in 
comments that:
     Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
     Evaluate the accuracy of the agency's estimate of the 
burden of the collection of information, including the validity of the 
methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., by 
permitting electronic submission of responses.
    Type of Review: Revision of a currently approved collection.
    Agency: Office of Labor-Management Standards.
    Title: Labor Organization and Auxiliary Reports.
    OMB Number: 1215-0188.
    Affected Public: Private Sector: Not-for-profit institutions.
    Number of Annual Responses: 33,684.
    Frequency of Response: Annual for most forms.
    Estimated Total Annual Burden Hours: 4,411,641.
    Estimated Total Annual Burden Cost: $185,035,644.
    Potential respondents are hereby duly notified that such persons 
are not required to respond to a collection of information or revision 
thereof unless approved by OMB under the PRA and it displays a 
currently valid OMB control number. See 35 U.S.C. 
3506(c)(1)(B)(iii)(V). In accordance with 5 CFR 1320.11(k), the 
Department will publish a notice in the Federal Register informing the 
public of OMB's decision with respect to the ICR submitted thereto 
under the PRA.

Regulatory Flexibility Analysis

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq., 
requires agencies to consider the impact of their regulatory proposals 
on small entities, analyze effective alternatives that minimize small 
entity impacts, and make initial analyses available for public comment. 
5 U.S.C. 603, 604. If an agency determines that its rule will not have 
a significant economic impact on a substantial number of small 
entities, it must certify that conclusion to the Small Business 
Administration (SBA). 5 U.S.C. 605(b).
    As in prior rulemakings, the Department's regulatory flexibility 
analysis utilizes the Small Business Administration's (``SBA'') ``small 
business'' standard for ``Labor Unions and Similar Labor 
Organizations.'' Specifically, the Department used the $5 million 
standard established in 2000, which was updated to $6.5 million in 2005 
and in 2008 to $7 million, for purposes of its regulatory flexibility 
analyses. See 65 FR 30836 (May 15, 2000); 70 FR 72577 (Dec. 6, 2005). 
This same standard ($7 million) has been used in developing the 
regulatory flexibility analysis for this rule.
    All numbers used in this analysis are based on 2006 data taken from 
the Office of Labor-Management Standards e.LORS database, which 
contains data from annual financial reports filed by labor 
organizations with the Department pursuant to the LMRDA, and BLS 
data.\16\ Accordingly, the following analysis assesses the impact of 
these regulations on small entities as defined by the applicable SBA 
size standards.
---------------------------------------------------------------------------

    \16\ In order to estimate the number of labor organizations that 
will report subsidiaries, the Department also analyzed Form LM-2 
reports from 2004, which was the final year in which filers were 
required to identify whether they had a subsidiary organization.
---------------------------------------------------------------------------

1. Statement of the Need for, and Objectives of, the Proposed Rule
    The following is a summary of the need for and objectives of the 
proposed rule. A more complete discussion is found earlier in this 
preamble.
    The objective of this proposed rule is to reinstate subsidiary 
organization reporting on Form LM-2. Subsidiary reporting on the Form 
LM-2 was eliminated with revisions to the form in 2003 in anticipation 
of the implementation of the Form T-1. Until 2003, a union's annual 
Form LM-2 report would not be complete without inclusion of 
subsidiaries' financial information. This requirement was superseded by 
the introduction of the Form T-1. With the rescission of the Form T-1, 
reporting on subsidiary organizations is proposed to be reinstated 
within the Form LM-2 reporting requirements. Thus, the proposed rule 
requires that labor organizations include within their Form LM-2 filing 
financial information concerning their subsidiary organizations, 
defined as ``any separate organization of which the ownership is wholly 
vested in the reporting labor organization or its officers or its 
membership, which is governed or controlled by the officers, employees, 
or members of the reporting labor organization, and which is wholly 
financed by the reporting labor organization.'' See proposed Form LM-2 
Instructions, Section X.
    As noted earlier in the preamble, the return of subsidiary 
organizations to the

[[Page 5473]]

Form LM-2 reporting requirements will improve the amount of financial 
disclosure of such entities, as compared to disclosure under the Form 
T-1. Under the proposal, and as the Form LM-2 long required, a union 
must disclose the financial information of its subsidiary to the same 
level of detail as other assets of the union, even if the union chose 
to file a separate Form LM-2 report for the subsidiary or to file an 
audit for the entity. See pre-2003 Form LM-2 Instructions, Section X. 
In contrast, the Form T-1, while requiring similar detail in reporting 
of receipts and disbursements, requires less detailed reporting of 
assets and liabilities. See Form T-1, Items 16-24, and Form LM-2, 
Schedules 1-10.
    The Department proposes to provide to Form LM-2 filers two options 
regarding the reporting of their subsidiaries, rather than the three 
options provided in the pre-2003 Form LM-2 Instructions. The Department 
proposes that Form LM-2 filers can either consolidate their 
subsidiaries' financial information on their Form LM-2 report, or they 
can file, with their Form LM-2 report, a regular annual report of the 
financial condition and operations of each subsidiary organization, 
accompanied by a statement signed by an independent public accountant 
certifying that the financial report presents fairly the financial 
condition and operations of the subsidiary organization and was 
prepared in accordance with generally accepted accounting principles. 
Specific information concerning loans payable and payments to officers 
and employees, in the same detail required under the related schedules 
on Form LM-2, also would have to be reported.
    The Department proposes to not reinstate a previous third option 
for filers: that of filing a separate Form LM-2 report that includes 
only the subsidiary's financial information. In the Department's 
experience, the filing of a separate Form LM-2 in addition to the 
union's primary report creates confusion for union members and others 
viewing the reports in that the form is designed for unions, not 
segregated funds and assets. Moreover, a union must file one Form LM-2 
report per fiscal year, and the filing of multiple forms by a union for 
its subsidiaries creates confusion as to which one is the primary form. 
While consolidation contains some risk of confusion, the Department's 
experience is that combined reports are easier to follow than separate 
reports. Moreover, consolidation is entirely appropriate for 
subsidiaries that are wholly owned, wholly financed, and wholly 
controlled by the reporting labor union. This reporting method is a 
particularly appropriate and desirable option for some unions with 
subsidiaries that perform traditional union operations, such as strike 
funds and other special union funds. Thus, the Department proposes to 
preserve this option for Form LM-2 filers.
    Additionally, to preserve consistency, the Department proposes to 
alter the Form LM-3 instructions regarding the reporting of subsidiary 
organizations by aligning them with the revised Form LM-2 instructions 
pertaining to the two options for reporting on subsidiaries. This 
proposal would establish uniformity with the subsidiary reporting 
requirements of the two forms.
2. Legal Basis for Rule
    The legal authority for this final rule is section 208 of the 
LMRDA. 29 U.S.C. 438. Section 208 provides that the Secretary of Labor 
shall have authority to issue, amend, and rescind rules and regulations 
prescribing the form and publication of reports required to be filed 
under title II of the Act, including rules prescribing reports 
concerning trusts in which a labor organization is interested, and such 
other reasonable rules and regulations as she may find necessary to 
prevent the circumvention or evasion of the reporting requirements. 29 
U.S.C. 438.
3. Number of Small Entities Covered Under the Proposal
    As stated in the preamble and in the PRA analysis, 1,087 filers 
indicated that they had at least one subsidiary organization on their 
2004 Form LM-2 reports, the final year in which filers were required to 
identify on Item 10 whether they had a subsidiary organization. The 
Department assumes that of those 1087 filers, 100 labor organizations 
have receipts valued above SBA's $7 million threshold used to 
differentiate between small and large entities. Therefore, the 
Department concludes that there are 987 small labor organizations with 
receipts below the $7 million threshold that may be affected by this 
rule. Further, in its experience, those smaller unions with under $7 
million in annual receipts will each only have one subsidiary. See PRA 
analysis, supra.
4. Relevant Federal Requirements Duplicating, Overlapping or 
Conflicting With the Rule
    To the extent that there are federal rules that duplicate, overlap, 
or conflict with this rule, this is the result of the requirements of 
the LMRDA and other Federal statutes, such as the Employee Retirement 
Income Security Act (ERISA) and the Internal Revenue Code. Section 
201(b) of the LMRDA requires reporting of all assets, liabilities, 
receipts, and disbursements of labor organizations, and this includes 
subsidiary organizations. 29 U.S.C. Sec.  431(b). However, to limit 
burden and any potential duplication, the Department allows filers to 
attach an audit rather than consolidate information on their 
subsidiaries.
5. Differing Compliance or Reporting Requirements for Small Entities
    Labor organizations that have total annual receipts of $250,000 or 
more must file the revised Form LM-2. Under the proposed rule, the 
reporting, recordkeeping, and other compliance requirements apply 
equally to all labor organizations that are required to file a Form LM-
2 under the LMRDA.
6. Clarification, Consolidation and Simplification of Compliance and 
Reporting Requirements for Small Entities
    Form LM-2 filers are directed to use an electronic reporting 
format. OLMS will provide compliance assistance for any questions or 
difficulties that may arise from using the Form LM-2 reporting 
software. A toll-free help desk is staffed during normal business hours 
and can be reached by telephone at 1-866-401-1109.
    Additionally, the use of electronic forms makes it possible to 
download information from previously filed reports directly into the 
form; enables most schedule information to be imported onto the form; 
makes it easier to enter information; and automatically performs 
calculations and checks for typographical and mathematical errors and 
other discrepancies, which assists reporting compliance and reduces the 
likelihood that a union will have to file an amended report. The error 
summaries provided by the software, combined with the speed and ease of 
electronic filing, also make it easier for both the reporting labor 
organization and OLMS to identify errors in both current and previously 
filed reports and to file amended reports to correct them.
7. Steps Taken To Reduce Burden
    The proposed rule substantially reduces the burden on labor 
organizations that file the Form LM-2, including many small labor 
organizations. By proposing to rescind the Form T-1, which was 
estimated to affect 2,292 Form LM-2 filers, the proposed rule will 
eliminate a projected average cost per filer of $4,851.20 in the first 
year and $2,609.29 in subsequent

[[Page 5474]]

year. Subsidiary organization reporting, in contrast, impacts fewer 
unions (only 1,087 unions are estimated to have such entities), and the 
cost to consolidate their financial information is only $2,431.61. The 
Department has further reduced the burden by permitting those unions 
who already have audit reports for such subsidiaries to attach them to 
their Form LM-2. See PRA analysis, supra.
8. Reporting, Recording and Other Compliance Requirements of the Rule
    This analysis only considers labor organizations with annual 
receipts between $250,000 and $7 million. Labor organizations with less 
than $250,000 in annual receipts are not required to file the Form LM-2 
and those with annual receipts greater than $7 million are outside of 
the coverage of the Regulatory Flexibility Act. The proposed rule is 
not expected to have a significant economic impact on a substantial 
number of small entities. The LMRDA is primarily a reporting and 
disclosure statute. Accordingly, the primary economic impact will be 
the cost of obtaining and reporting required information.
    As stated above, the Department estimates that there are 987 labor 
unions with under $7 million in total annual receipts, which are 
affected by this rule. Additionally, these unions will have a burden of 
only $2,431.61, which comes out to merely 0.97% of the total annual 
receipts of the smallest Form LM-2 filers ($250,000 in total annual 
receipts) and about 0.07% of the median of unions between $250,000 and 
$7 million in total annual receipts (i.e. $3,375,000 in total annual 
receipts). The Department has further reduced the burden by permitting 
those unions who already have audit reports for such subsidiaries to 
attach them to their Form LM-2. See PRA analysis, supra. Moreover, the 
Department does not believe that the burden will be as great on smaller 
unions as those with greater than $7 million in total annual receipts, 
as the smaller unions' subsidiaries will not be as complicated and as 
large, in areas such as total officers, employees, receipts and 
disbursements.
9. Conclusion
    The Regulatory Flexibility Act does not define either ``significant 
economic impact'' or ``substantial'' as it relates to the number of 
regulated entities. 5 U.S.C. 601. In the absence of specific 
definitions, ``what is `significant' or `substantial' will vary 
depending on the problem that needs to be addressed, the rule's 
requirements, and the preliminary assessment of the rule's impact.'' A 
Guide for Government Agencies, supra, at 17. As to economic impact, one 
important indicator is the cost of compliance in relation to revenue of 
the entity. Id.
    As noted above, the Department estimates that there are 987 labor 
unions with under $7 million in total annual receipts that will be 
affected by this rule, and each of these has an estimated one 
subsidiary about which it will be required to report. As noted in the 
PRA analysis, supra, the Department estimated above that a labor 
organization's cost for filing a report for one subsidiary is 
$2,431.61. This cost represents less that one percent (0.97%) of the 
total annual receipts of the smallest Form LM-2 filers ($250,000 in 
total annual receipts). Further, this cost represents less than one-
tenth of one percent (0.07%) of the median of unions between $250,000 
and $7 million in total annual receipts (i.e. $3,375,000 in total 
annual receipts).
    The Department concludes that this economic impact is not 
significant, as that term is employed for the purpose of this analysis. 
As to the number of labor organizations affected by this rule, the 
Department has determined, by examining e.LORS data, that there are 987 
smaller unions (each with one subsidiary) affected by this rule. This 
total represents only 23.34% of the recent total of 4,228 Form LM-2s 
from labor organizations with receipts between $250,000 and $7,000,000 
(which constitute just 17.6% of the 24,065 labor organizations that 
must file any of the annual financial reports required under the LMRDA 
(Forms LM-2, LM-3, or LM-4)). The Department concludes that the rule 
does not impact a substantial number of small entities. Therefore, 
under 5 U.S.C. 605, the Department concludes that the proposed rule 
will not have a significant economic impact on a substantial number of 
small entities.

Electronic Filing of Forms and Availability of Collected Data

    Appropriate information technology is used to reduce burden and 
improve efficiency and responsiveness. The Form LM-2 now in use can be 
downloaded from the OLMS Web site. OLMS also has implemented a system 
to require Form LM-2 filers and permit Form LM-3 and Form LM-4 filers 
to submit forms electronically with digital signatures. Labor 
organizations are currently required to pay a fee to obtain electronic 
signature capability for the two officers who sign the form. Digital 
signatures ensure the authenticity of the reports.
    The OLMS Internet Disclosure site at http://www.unionreports.gov is 
available for public use. The site contains a copy of each labor 
organization's annual financial report for reporting years 2000 and 
thereafter, as well as an indexed computer database of the information 
in each report that is searchable through the Internet.
    Information about this system can be obtained on the OLMS Web site 
at http:[sol][sol]www.olms.dol.gov.

Appendix A: Specific Changes to the Form LM-2 Instructions

A. General Instructions

Section II. What Form To File

    Current instructions read:
    Every labor organization subject to the LMRDA, CSRA, or FSA with 
total annual receipts of $250,000 or more must file Form LM-2. The 
term ``total annual receipts'' means all financial receipts of the 
labor organization during its fiscal year, regardless of the source, 
including receipts of any special funds as described in Section VIII 
(Funds To Be Reported) of these instructions. Receipts of a trust in 
which the labor organization is interested should not be included in 
the total annual receipts of the labor organization when determining 
which form to file unless the trust is wholly owned, wholly 
controlled, and wholly financed by the labor organization.
    Labor organizations with total annual reports of less than 
$250,000 may file the simplified annual report Form LM-3, if not in 
trusteeship as defined in Section IX (Labor Organizations In 
Trusteeship) of these instructions. Labor organizations with total 
annual receipts of less than $10,000 may file the abbreviated annual 
report Form LM-4, if not in trusteeship.
    The Department proposes that the above language be revised to 
read:
    Every labor organization subject to the LMRDA, CSRA, or FSA with 
total annual receipts of $250,000 or more must file Form LM-2. The 
term ``total annual receipts'' means all financial receipts of the 
labor organization during its fiscal year, regardless of the source, 
including receipts of any special funds as described in Section VIII 
(Funds To Be Reported) or as described in Section X (Labor 
Organizations With Subsidiary Organizations). Receipts of a trust in 
which the labor organization is interested should not be included in 
the total annual receipts of the labor organization when determining 
which form to file, unless the 3(l) trusts is a subsidiary 
organization of the union.
    Labor organizations with total annual receipts of less than 
$250,000 may file the simplified Form LM-3, if not in trusteeship as 
defined in Section IX (Labor Organization In Trusteeship) of these 
instructions. Labor organizations with total annual receipts of less 
than $10,000 may file the abbreviated annual report Form LM-4, if 
not in trusteeship.

Section VIII. Funds To Be Reported

    Current instructions read:
    The labor organization must report financial information on Form 
LM-2 for all

[[Page 5475]]

funds of the labor organization. Include any special purpose funds 
or accounts, such as strike funds, vacation funds, and scholarship 
funds even if they are not part of the labor organization's general 
treasury. The labor organization is required to report information 
about any trust in which it is interested on the Form T-1. See 
Section X (Trusts In Which A Labor Organization Is Interested).
    The Department proposes that the above language be revised to 
read:
    The labor organization must report financial information on Form 
LM-2 for all funds of the labor organization. Include any special 
purpose funds or accounts, such as strike funds, vacation funds, and 
scholarship funds even if they are not part of the labor 
organization's general treasury. These special purpose funds include 
those of subsidiary organizations. See Section X (Labor 
Organizations With Subsidiary Organizations).

Special Instructions for Certain Organizations

Section X. Labor Organizations With Subsidiary Organizations

    Current instructions read:
    A trust in which a labor organization is interested is defined 
in Section 3(l) of the LMRDA (29 U.S.C. 402(l)) as:
    * * *a trust or other fund or organization (1) 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 (2) a primary 
purpose of which is to provide benefits for the members of such 
labor organization or their beneficiaries.
    The definition of a trust in which a labor organization is 
interested may include, but is not limited to, joint funds 
administered by a union and an employer pursuant to a collective 
bargaining agreement, educational or training institutions, credit 
unions created for the benefit of union members, and redevelopment 
or investment groups established by the unions for the benefit of 
its members. The determination whether a particular entity is a 
trust in which a labor organization is interested must be based on 
the facts in each case.
    A labor organization is required to report in Form LM-2 
information concerning each LMRDA Section 3(l) trust in accordance 
with the instructions in Item 10 of Form LM-2.
    A labor organization must, in addition, file a separate Form T-1 
report disclosing assets, liabilities, receipts, and disbursements 
of a trust in which the labor organization is interested if the 
labor organization, alone or in combination with other labor 
organizations, either (1) appoints or selects a majority of the 
members of the trust's governing board or (2) contributes to the 
trust greater than 50% of the trust's receipts during the one year 
reporting period. Any contributions made pursuant to a collective 
bargaining agreement shall be considered the labor organization's 
contribution.
    No Form T-1 should be filed for any labor organization that 
already files a Form LM-2, LM-3, or LM-4, nor should a report be 
filed for any entity that is expressly exempted from reporting in 
the Act, such as organizations composed entirely of state or local 
government employees or state or local central bodies.
    No Form T-1 need be filed for:
     A Political Action Committee (PAC) if timely, complete, 
and publicly available reports on the PAC funds are filed with a 
Federal or state agency
     A political organization under 26 U.S.C. 527, if 
timely, complete, and publicly available reports are filed with the 
Internal Revenue Service
     A federal employee health benefit plan subject to the 
provisions of the Federal Employees Health Benefits Act (FEHBA)
     A for-profit commercial bank established or operating 
pursuant to the Bank Holding Act of 1956, 12 U.S.C. 1843
     An employee benefit plan required to file a Form 5500 
for a plan year ending during the reporting period of the union.
    For purposes of these instructions, only, a trust is ``required 
to file a Form 5500'' if a plan administrator is required to file an 
annual report on behalf of the trust under 29 U.S.C. sections 1021 
and/or 1024.\17\ However, if the plan administrator of the trust is 
eligible for an exemption from filing a Form 5500 or Form 5500-SF, 
then a Form T-1 must be filed for that section 3(l) trust regardless 
of whether a Form 5500 or Form 5500-SF is filed on its behalf. For a 
definition of plans ``required to file a Form 5500'' for purposes of 
filing the Form T-1, see 29 CFR 403.2(d)(3)(vi).
---------------------------------------------------------------------------

    \17\ The following sections of title 29 of the Code of Federal 
Regulations identify for purposes of these instructions, the types 
of ERISA plans that are not required to file a Form 5500: section 
2520.104-20 (small unfunded, insured, or combination welfare plans), 
section 2520.104-22 (apprenticeship and training plans), section 
2520.104-23 (unfunded or insured management and highly compensated 
employee pension plans), section 2520.104-24 (unfunded or insured 
management and highly compensated employee welfare plans), section 
2520.104-25 (day care center plans), section 2520.104-26 (unfunded 
dues financed welfare plans maintained by employee organizations), 
section 2520.104-27 (unfunded dues financed pension plans maintained 
by employee organizations), section 2520.104-43 (certain small 
welfare plans participating in group insurance arrangements), and 
section 2520.104-44 (large unfunded, insured, or combination welfare 
plans; certain fully insured pension plans). Labor organizations 
must file a Form T-1 for these types of plans.
---------------------------------------------------------------------------

    An abbreviated Form T-1 report may be filed where a qualifying 
independent audit also is submitted, in accordance with requirements 
specified in the Form T-1 instructions.
    A Form T-1 report must be filed within 90 days after the end of 
the union's fiscal year. The Form T-1 covers the most recently 
concluded fiscal year of the trust.
    See Instructions for Form T-1, Trust Annual Report.
    Questions regarding these reporting requirements should be 
directed to the OLMS Division of Interpretations and Standards, 
which can be reached by e-mail at OLMS-Public@dol.gov, by phone at 
202-693-0123, by fax at 202-693-1340, or at the following address: 
U.S. Department of Labor, Employment Standards Administration, 
Office of Labor-Management Standards, 200 Constitution Avenue, NW., 
Room N-5609, Washington, DC 20210.
    Examples of a trust in which a labor organization is interested 
may include, but are not limited to, the following entities:
    Example A: The Building Corporation--A labor organization 
creates a corporation which owns the building where the union has 
its offices. The building corporation must be reported as a trust in 
which the labor organization is interested.
    Example B: The Redevelopment Corporation--A labor organization 
creates an entity named the Redevelopment Corporation, or appoints 
one or more of the members of the governing board of the 
Corporation, which is established primarily to enable members of the 
labor organization to obtain low cost housing constructed with 
Federal Housing and Urban Development (HUD) grants. The 
Redevelopment Corporation must be reported as a trust in which it is 
interested. A labor organization that neither participated in the 
creation of the Corporation, nor appointed members of its governing 
board, but loaned money to the Corporation to use as matching money 
for HUD grants need not report the Corporation as a trust in which 
it is interested.
    Example C: The Educational Institute--Five reporting labor 
organizations form the Educational Institute to provide educational 
services primarily for the benefit of their members. Similar 
services are also provided to the general public. Each labor 
organization contributes funds to start the Educational Institute, 
which will then offer various educational programs that will 
generate revenue. Each labor organization that participated in 
forming the Institute, or that appoints a member to its governing 
body, must report the Educational Institute as a trust in which it 
is interested.
    Example D: Joint Funds--A reporting labor organization that 
forms a ``joint fund'' with a large national manufacturer to offer a 
variety of training and jobs skills programs for members of the 
labor organization, or appoints a member to the governing body of 
such a fund, must report the joint fund as a trust in which the 
labor organization has an interest.
    Example E: Job Targeting Fund--A reporting labor organization 
creates an entity for the purpose of making targeted disbursements 
to increase employment opportunities for its members. The fund must 
be reported as a trust in which the labor organization is 
interested.
    The Department proposes that the above language be revised to 
read:
    The labor organization must disclose assets, liabilities, 
receipts, and disbursements of a subsidiary organization.
    Within the meaning of these instructions, a subsidiary 
organization is defined as any separate organization of which the 
ownership is wholly vested in the reporting labor organization or 
its officers or its membership, which is governed or controlled by 
the officers, employees, or members of the reporting labor 
organization, and which is wholly financed by the reporting labor 
organization. A subsidiary organization is considered to be wholly 
financed if the initial financing was provided by the

[[Page 5476]]

reporting labor organization even if the subsidiary organization is 
currently wholly or partially self-sustaining. An example of a 
subsidiary organization is a building corporation which holds title 
to a building; the labor organization owns the building corporation, 
selects the officers, and finances the operation of the building 
corporation.
    A labor organization is required to report financial information 
for each of its subsidiary organizations using one of the following 
methods:
    Method (1)--Consolidate the financial information for the 
subsidiary organization(s) and the labor organization on a single 
Form LM-2.
    Method (2)--File, with the labor organization's Form LM-2, the 
regular annual report of the financial condition and operations of 
the subsidiary organization, accompanied by a statement signed by an 
independent public accountant certifying that the financial report 
presents fairly the financial condition and operations of the 
subsidiary organization and was prepared in accordance with 
generally accepted accounting principles.
    Financial information reported separately for subsidiary 
organizations under method (2) must include the name of the 
subsidiary organization and the name and file number of the labor 
organization as shown on its Form LM-2. The financial report of the 
subsidiary organization must cover the same reporting period as that 
used by the reporting labor organization.
    When method (2) is used and the subsidiary organization is an 
investment, the financial interest of the reporting labor 
organization in the subsidiary organization must be reported in Item 
26 (Investments) and in Schedule 5 (Investments) of the labor 
organization's Form LM-2. When method (2) is used and the subsidiary 
organization is of a non-investment nature, the financial interest 
of the reporting labor organization in the subsidiary organization 
must be reported in Item 28 (Other Assets) of the labor 
organization's Form LM-2.
    The same type of information required on Form LM-2 regarding 
disbursements to officers and employees and loans made by labor 
organizations must also be reported with respect to the subsidiary 
organization. In method (1) the information relating to the 
subsidiary organization must be combined with that of the labor 
organization and reported on the labor organization's Form LM-2 on 
Schedule 11 and Schedule 12 in the detail required by the 
instructions. If method (2) is used, an attachment must be submitted 
containing the information required by the instructions for 
Schedules 2, 11, and 12.
    The information regarding loans made by the subsidiary 
organization must include a listing of the names of each officer, 
employee, or member of the labor organization and each officer or 
employee of the subsidiary organization whose total loan 
indebtedness to the subsidiary organization, to the labor 
organization, or to both at any time during the reporting period 
exceeded $250. However, if method (2) is used, the amount reported 
by the subsidiary organization should be only the amount owed to the 
subsidiary organization.
    The annual financial report must also include all disbursements 
made by the subsidiary organization to or on behalf of its officers 
and officers of the labor organization. The report must also list 
the name and position of the subsidiary organization's employees 
whose total gross salaries, allowances, and other disbursements from 
the subsidiary organization, the reporting labor organization, and 
any affiliates were more than $10,000. However, if method (2) is 
used, only the disbursements of the subsidiary organization for its 
employees should be reported.

XI. Completing Form LM-2

    Item 10 currently reads:
    10. TRUSTS OR FUNDS--Answer ``Yes'' to Item 10, if the labor 
organization has an interest in a trust as defined in 29 U.S.C. 
402(l) (see Section X of these Instructions). Provide in Item 69 
(Additional Information) the full name, address, and purpose of each 
trust. Also include in Item 69 the fiscal year ending date for any 
trust for which a Form T-1 is filed if the trust's fiscal year is 
different from that of the labor organization. If no Form T-1 is 
required to be filed on the trust because (1) the trust had annual 
receipts of less than $250,000 during the trust's most recent fiscal 
year or (2) the labor organization's financial contribution to the 
trust or the contribution made on the labor organization's behalf, 
or as a result of a negotiated agreement to which the labor 
organization is a party, is less than $10,000, the labor 
organization should also report the amount of the contribution in 
Item 69 and, if the contribution was made by the labor organization 
itself, in the appropriate disbursement item in Statement B. 
Additionally, if no Form T-1 is filed because financial information 
is already available as a result of the disclosure requirements of 
another Federal statute, list the name of any government agency, 
such as the Employee Benefits Security Administration (EBSA) of the 
Department of Labor, with which the trust files a publicly available 
report, and the relevant file number of the trust, or otherwise 
indicate where the relevant report may be viewed. See Instructions 
for Form T-1, Trust Annual Report, for guidance on reporting the 
assets, liabilities, receipts, disbursements, and other information 
about these entities.
    The Department proposes that the above language be revised to 
read:
    10. TRUSTS--Answer ``Yes'' to Item 10, if the labor organization 
has an interest in a trust as defined in 29 U.S.C. 402(l). Provide 
in Item 69 (Additional Information) the full name, address, and 
purpose of each trust. If a report has been filed for the trust or 
other fund under the Employee Retirement Income Security Act of 1974 
(ERISA), report in Item 69 (Additional Information) the ERISA file 
number (Employer Identification Number--EIN) and plan number, if 
any.
    The Department proposes that the Form LM-2 be revised to break 
current Item 11 on the form into two questions to be read as 
follows:
    Item 11(a). During the reporting period did the labor 
organization have a political action committee fund (PAC)?
    Item 11(b). During the reporting period did the labor 
organization have a subsidiary organization as defined in Section X 
of these Instructions?
    Current instructions read:
    If the labor organization answered ``Yes'' to Item 11, provide 
in Item 69 (Additional Information) the full name of each separate 
political action committee (PAC) and list the name of any government 
agency, such as the Federal Election Commission or a state agency, 
with which the PAC has filed a publicly available report, and the 
relevant file number of the PAC. (PAC funds kept separate from the 
labor organization's treasury need not be included in the labor 
organization's Form LM-2 if publicly available reports on the PAC 
funds are filed with a Federal or state agency.)
    The Department proposes that the Instructions for Item 11 be 
revised to read:
    If the labor organization answered ``Yes'' to Item 11(a), in 
reference to a political action committee, provide in Item 69 
(Additional Information) the full name of each separate political 
action committee (PAC) and list the name of any government agency, 
such as the Federal Election Commission or a state agency, with 
which the PAC has filed a publicly available report, and the 
relevant file number of the PAC. (PAC funds kept separate from the 
labor organization's treasury need not be included in the labor 
organization's Form LM-2 if publicly available reports on the PAC 
funds are filed with a Federal or state agency.)
    If the labor organization answered ``Yes'' to Item 11(b), in 
reference to a subsidiary organization, provide in Item 69 
(Additional Information) the name, address, and purpose of each 
subsidiary organization. Indicate whether the information concerning 
its financial condition and operations is included in this Form LM-2 
or in a separate report. See Section X of these instructions for 
information on reporting subsidiary organizations.

Schedule 2--Loans Receivable

    The instructions regarding Column (A) currently read:
    Column (A): Enter the following information on Lines 1 through 3 
(and on continuation pages if necessary):
     The name of each officer, employee, or member whose 
total loan indebtedness to the labor organization at any time during 
the reporting period exceeded $250, and the name of each business 
enterprise which had any loan indebtedness, regardless of amount, at 
any time during the reporting period;
    The Department proposes that the Instructions for Schedule 2, 
Column (A) be revised to read:
    Column (A): Enter the following information on Lines 1 through 3 
(and on continuation pages if necessary):
     The name of each officer, employee, or member whose 
total loan indebtedness to the labor organization, including any 
subsidiary organization, at any time during the reporting period 
exceeded $250, and the name of each business enterprise which had 
any loan indebtedness, regardless of amount, at any time during the 
reporting period;

Schedule 5--Investments Other Than U.S. Treasury Securities

    Schedule 5, Item 6 currently reads:

[[Page 5477]]

    List each other investment which has a book value over $5,000 
and exceeds 5% of Line 5. Also, list each Trust which is an 
investment.
    The Department proposes that Schedule 5, Item 6 be revised to 
read:
    List each other investment which has a book value over $5,000 
and exceeds 5% of Line 5. Also, list each subsidiary for which 
separate reports are attached.
    The Instructions for Schedule 5 currently read:
    Report details of all the labor organization's investments at 
the end of the reporting period, other than U.S. Treasury 
securities. Include mortgages purchased on a block basis and any 
investments in a trust as defined in Section X (Trusts in Which a 
Labor Organization is Interested) of these instructions. Do not 
include savings accounts, certificates of deposit, or money market 
accounts, which must be reported in Item 22 (Cash) of Statement A.
    The Department proposes that the Instructions for Schedule 5 be 
revised to read:
    Report details of all the labor organization's investments at 
the end of the reporting period, other than U.S. Treasury 
securities. Include mortgages purchased on a block basis and 
investments in any subsidiary organization not reported on a 
consolidated basis in accordance with method (1) explained in 
Section X of these instructions. Do not include savings accounts, 
certificates of deposit, or money market accounts, which must be 
reported in Item 22 (Cash) of Statement A.
    The Instructions for the Schedule 5, Note currently read:

    Note:  All trusts in which the labor organization is interested 
which are investments of the labor organization (such as real estate 
trusts, building corporations, etc.) must be reported in Schedule 5. 
On Lines 6(a) through (d) enter the name of each trust in Column (A) 
and the labor organization's share of its book value in Column (B).

    The Department proposes that the Instructions for Schedule 5, 
Note be revised to read:

    Note: If your organization has a subsidiary organization for 
which a separate report is being submitted in accordance with 
Section X of these instructions, the subsidiary organization must be 
reported in Schedule 5 if it is an investment. Enter on Lines 6(a) 
through (d) the name of each subsidiary organization in Column (A) 
and its book value in Column (B).

    The Instructions for Schedule 7--Other Assets, Note currently 
read:

    Note: If the labor organization has an ownership interest of a 
non-investment nature in a trust in which it is interested (such as 
a training fund) the value of the labor organization's ownership 
interest in the entity as shown on the labor organization's books 
must be reported in Schedule 7 (Other Assets). Enter in Column (A) 
the name of any such entity. Enter in Column (B) the value as shown 
on the labor organization's books of its share of the net assets of 
any such entity.

    The Department proposes that the Instructions for Schedule 7, 
Note be revised to read:

    Note: If your organization has a subsidiary organization for 
which a separate report is being submitted in accordance with 
Section X of these instructions, the value of the subsidiary 
organization as shown on your organization's books must be reported 
in Schedule 7 if it is of a non-investment nature. Enter in Column 
(A) the name of any such subsidiary organization. Enter in Column 
(B) the value as shown on your organization's books of the net 
assets of any such subsidiary organization.

    The Instructions for Schedule 12--Disbursements to Employees, 
Columns (A), (B), and (C) currently read:
    Column (A): Enter the last name, first name, and middle initial 
of each employee who during the reporting period received $10,000 or 
more in gross salaries, allowances, and other direct and indirect 
disbursements from the labor organization or from the labor 
organization and any affiliates and/or trusts of the labor 
organization. (``Affiliates'' means labor organizations chartered by 
the same parent body, governed by the same constitution and bylaws, 
or having the relation of parent and subordinate.) The labor 
organization's report, however, should not include disbursements 
made by affiliates or trusts but should include only the 
disbursements made by the labor organization.
    Column (B): Enter the position each listed employee held in the 
labor organization.
    Column (C): Enter the name of any affiliate or trust that paid 
any salaries, allowances, or expenses on behalf of a listed 
employee.
    The Department proposes that the Instructions for Schedule 12, 
Columns (A), (B), and (C) be revised to read:
    Column (A): Enter the last name, first name, and middle initial 
of each employee who during the reporting period received $10,000 or 
more in gross salaries, allowances, and other direct and indirect 
disbursements from the labor organization (including any subsidiary 
organizations) or form the labor organization and any affiliates. 
(``Affiliates'' means labor organizations chartered by the same 
parent body, governed by the same constitution and bylaws, or having 
the relation of parent and subordinate.) The labor organization's 
report, however, should not include disbursements made by affiliates 
but should include only the disbursements made by the labor 
organization.
    Column (B): Enter the position each listed employee held in the 
labor organization (including any subsidiary organizations).
    Column (C): Enter the name of any affiliate that paid any 
salaries, allowances, or expenses on behalf of a listed employee. If 
a subsidiary of the labor organization paid any salaries, 
allowances, or expenses on behalf of a listed employee, see Section 
X of these Instructions for information about reporting these 
disbursements.
    The Department seeks comments on its proposed changes to the 
Form LM-2 and instructions.

Appendix B: Specific Proposed Changes to the Form LM-3 and Instructions

    The text of the Form LM-3 and Instructions pertaining to some 
sections will be changed to address the reporting of subsidiary 
organizations. With respect to the Form, the Department proposes to 
remove Item 3(c), which currently requires to identify if the report 
is exclusively filed for a subsidiary organization, as the 
Department proposes to remove this option, as described above. The 
proposed revised Form LM-3 Instructions include changes to sections 
VIII and X.
    Section VIII currently reads:

VIII. Funds To Be Reported

    Your labor organization's Form LM-3 must report financial 
information for all funds of your organization. Include any special 
purpose funds or accounts, such as strike funds, vacation funds, and 
scholarship funds even it they are not part of your organization's 
general treasury. All labor organization political action committee 
(PAC) funds are considered to be labor organization funds. However, 
to avoid duplicate reporting, PAC funds which are kept separate from 
your labor organization's treasury are not required to be included 
in your organization's Form LM-3 if publicly available reports on 
the PAC funds are filed with a Federal or state agency.
    Your organization is required to report financial information 
about any ``subsidiary organization(s).'' Financial information 
about your organization and its subsidiary organizations may be 
combined on a single Form LM-3 or a separate report may be filed for 
any subsidiary organization. See Section X of these instructions for 
information on reporting financial information for subsidiary 
organizations.
    In combining the information concerning special funds and/or any 
subsidiary organizations, be sure to include the requested 
information and amounts for the ``special funds'' and subsidiary 
organizations as well as for your organization in all items.
    The Department proposes that Section VIII read:

VIII. Funds To Be Reported

    Your labor organization's Form LM-3 must report financial 
information for all funds of your organization. Include any special 
purpose funds or accounts, such as strike funds, vacation funds, and 
scholarship funds even it they are not part of your organization's 
general treasury. All labor organization political action committee 
(PAC) funds are considered to be labor organization funds. However, 
to avoid duplicate reporting, PAC funds which are kept separate from 
your labor organization's treasury are not required to be included 
in your organization's Form LM-3 if publicly available reports on 
the PAC funds are filed with a Federal or state agency.
    Your organization is required to report financial information 
about any ``subsidiary organization(s).'' Financial information 
about your organization and its subsidiary organizations may be 
combined on a single Form LM-3 or you may attach an audit to your 
Form LM-3 report as described in

[[Page 5478]]

Section X of these instructions for information on reporting 
financial information for subsidiary organizations.
    In combining the information concerning special funds and/or any 
subsidiary organizations, be sure to include the requested 
information and amounts for the ``special funds'' and subsidiary 
organizations as well as for your organization in all items.
    Current Section X reads:

X. Labor Organizations With Subsidiary Organizations

    A subsidiary organization, within the meaning of these 
instructions, is any separate organization of which the ownership is 
wholly vested in the reporting labor organization or its officers or 
its membership, which is governed or controlled by the officers, 
employees, or members of the reporting labor organization, and which 
is wholly financed by the reporting labor organization. A subsidiary 
organization is considered to be wholly financed if the initial 
financing was provided by the reporting labor organization even if 
the subsidiary organization is currently wholly or partially self-
sustaining. An example of a subsidiary organization is a building 
corporation which holds title to a building; the labor organization 
owns the building corporation, selects the officers, and finances 
the operation of the building corporation.
    If your organization has no subsidiary organization as defined 
above, skip to Section Xl of these instructions.
    A labor organization is required to report financial information 
for each of its subsidiary organizations using one of the following 
methods:
    Method (1)--Consolidate the financial information for the 
subsidiary organization(s) and the labor organization on a single 
Form LM-3.
    Method (2)--Complete a separate Form LM-3 for the subsidiary 
organization and file it with the labor organization's Form LM-3. 
The LM-3 report for the subsidiary organization must be identified 
by selecting Item 3(c).
    Method (3)--File, with the labor organization's Form LM-3, the 
regular annual report of the financial condition and operations of 
the subsidiary organization, accompanied by a statement signed by an 
independent public accountant certifying that the financial report 
presents fairly the financial condition and operations of the 
subsidiary organization and was prepared in accordance with 
generally accepted accounting principles. Financial information 
reported separately for subsidiary organizations under methods (2) 
and (3) above must include the name of the subsidiary organization 
and the name and file number of the labor organization as shown on 
its Form LM-3. The financial report of the subsidiary organization 
must cover the same reporting period as that used by the reporting 
labor organization.
    When method (2) or (3) is used and the subsidiary organization 
is an investment, the financial interest of the reporting labor 
organization in the subsidiary organization must be reported in Item 
28 (Investments) of the labor organization's Form LM-3.
    When method (2) or (3) is used and the subsidiary organization 
is of a non-investment nature, the financial interest of the 
reporting labor organization in the subsidiary organization must be 
reported in Item 30 (Other Assets) of the labor organization's Form 
LM-3.
    The same type of information required on Form LM-3 regarding 
disbursements to officers and employees and loans made by labor 
organizations must also be reported with respect to the subsidiary 
organization. In method (1) the information relating to the 
subsidiary organization must be combined with that of the labor 
organization and reported on the labor organization's Form LM-3 in 
Item 24 and in Item 56 in the detail required by the instructions 
for Items 17 and 18. In method (2) this information must be reported 
on the separate Form LM-3 of the subsidiary organization in Item 24 
and in Item 56 in the detail required by the instructions for Items 
17 and 18. If method (3) is used, an attachment must be submitted 
containing the information required by the instructions for Items 
17, 18, and 24.
    The information regarding loans made by the subsidiary 
organization must include a listing of the names of each officer, 
employee, or member of the labor organization and each officer or 
employee of the subsidiary organization whose total loan 
indebtedness to the subsidiary organization, to the labor 
organization, or to both at any time during the reporting period 
exceeded $250. However, if method (2) or (3) is used, the amount 
reported by the subsidiary organization should be only the amount 
owed to the subsidiary organization.
    The annual financial report must also include all disbursements 
made by the subsidiary organization to or on behalf of its officers 
and officers of the labor organization. The report must also list 
the name and position of the subsidiary organization's employees 
whose total gross salaries, allowances, and other disbursements from 
the subsidiary organization, the reporting labor organization, and 
any affiliates were more than $10,000. However, if method (2) or (3) 
is used, only the disbursements of the subsidiary organization for 
its employees should be reported.
    The Department proposes that Section X be revised to read:

X. Labor Organizations With Subsidiary Organizations

    A subsidiary organization, within the meaning of these 
instructions, is any separate organization of which the ownership is 
wholly vested in the reporting labor organization or its officers or 
its membership, which is governed or controlled by the officers, 
employees, or members of the reporting labor organization, and which 
is wholly financed by the reporting labor organization. A subsidiary 
organization is considered to be wholly financed if the initial 
financing was provided by the reporting labor organization even if 
the subsidiary organization is currently wholly or partially self-
sustaining. An example of a subsidiary organization is a building 
corporation which holds title to a building; the labor organization 
owns the building corporation, selects the officers, and finances 
the operation of the building corporation.
    If your organization has no subsidiary organization as defined 
above, skip to Section Xl of these instructions.
    A labor organization is required to report financial information 
for each of its subsidiary organizations using one of the following 
methods:
    Method (1)--Consolidate the financial information for the 
subsidiary organization(s) and the labor organization on a single 
Form LM-3.
    Method (2)--File, with the labor organization's Form LM-3, the 
regular annual report of the financial condition and operations of 
the subsidiary organization, accompanied by a statement signed by an 
independent public accountant certifying that the financial report 
presents fairly the financial condition and operations of the 
subsidiary organization and was prepared in accordance with 
generally accepted accounting principles. Financial information 
reported separately for subsidiary organizations under this method 
must include the name of the subsidiary organization and the name 
and file number of the labor organization as shown on its Form LM-3. 
The financial report of the subsidiary organization must cover the 
same reporting period as that used by the reporting labor 
organization.
    When method (2) is used and the subsidiary organization is an 
investment, the financial interest of the reporting labor 
organization in the subsidiary organization must be reported in Item 
28 (Investments) of the labor organization's Form LM-3.
    When method (2) is used and the subsidiary organization is of a 
non-investment nature, the financial interest of the reporting labor 
organization in the subsidiary organization must be reported in Item 
30 (Other Assets) of the labor organization's Form LM-3.
    The same type of information required on Form LM-3 regarding 
disbursements to officers and employees and loans made by labor 
organizations must also be reported with respect to the subsidiary 
organization. In method (1) the information relating to the 
subsidiary organization must be combined with that of the labor 
organization and reported on the labor organization's Form LM-3 in 
Item 24 and in Item 56 in the detail required by the instructions 
for Items 17 and 18. If method (2) is used, an attachment must be 
submitted containing the information required by the instructions 
for Items 17, 18, and 24.
    The information regarding loans made by the subsidiary 
organization must include a listing of the names of each officer, 
employee, or member of the labor organization and each officer or 
employee of the subsidiary organization whose total loan 
indebtedness to the subsidiary organization, to the labor 
organization, or to both at any time during the reporting period 
exceeded $250. However, if method (2) is used, the amount reported 
by the subsidiary organization should be only the amount owed to the 
subsidiary organization.
    The annual financial report must also include all disbursements 
made by the

[[Page 5479]]

subsidiary organization to or on behalf of its officers and officers 
of the labor organization. The report must also list the name and 
position of the subsidiary organization's employees whose total 
gross salaries, allowances, and other disbursements from the 
subsidiary organization, the reporting labor organization, and any 
affiliates were more than $10,000. However, if method (2) is used, 
only the disbursements of the subsidiary organization for its 
employees should be reported.

List of Subjects in 29 CFR Part 403

    Labor unions, Trusts, Reporting and recordkeeping requirements.

Text of Proposed Rule

    Accordingly, the Department proposes to amend part 403 of 29 CFR 
Chapter IV as set forth below:

PART 403--LABOR ORGANIZATION ANNUAL FINANCIAL REPORTS

    1. The authority citation for part 403 is revised to read as 
follows:

    Authority:  Labor-Management Reporting and Disclosure Act Secs. 
201, 207, 208, 73 Stat. 525, 529 (29 U.S.C. 431, 437, 438); 
Secretary's Order No. 4-2007, May 2, 2007, 72 FR 26159.


Sec.  403.2  [Amended]

    2. In Sec.  403.2, remove paragraph (d).


Sec.  403.5  [Amended]

    3. In Sec.  403.5, remove paragraph (d).


Sec.  403.8  [Amended]

    4. In Sec.  403.8, remove paragraph (c) and redesignate paragraph 
(d) as paragraph (c).

    Signed in Washington, DC, this 25th day of January 2010.
Andrew Auerbach,
Deputy Director, Office of Labor-Management Standards.
[FR Doc. 2010-1912 Filed 2-1-10; 8:45 am]
BILLING CODE 4510-CP-P