LM-2 Prep Tips, Part 1: The Questions Page

We will begin with page 2 of the Form LM-2.

This is known as the “Questions Page”; it contains 13 questions, labeled as Items 10-21 (Item 11 has 2 questions) about the labor organization. Some of these questions are straight forward, such as asking if the labor organization has a political action committee (Item 11a) or subsidiary (Item 11b) or obtained an audit or review of its books and records (Item 12). Others are a little more involved. Some of these questions are:

• Item 13 asks if the labor organization discovered any loss or shortage of funds or other assets during the reporting period. The labor organization should include any discrepancies in its finances. Even if the loss was recovered or arrangements are in effect for a full recovery, this question must be answered yes, and the loss described. Keep in mind: if Item 13 is answered Yes, the labor organization can expect to receive a call from the DOL shortly after the form is filed to inquire about this loss.
• Item 15 asks if during the reporting period the labor organization acquired or disposed of any items in a manner other than by purchase or sale. Simple question, right? Did you know this covers at least the following?
  • Donated or Retired Fixed Assets: If your union gave an unused computer to a local charity or threw out a conference table that was in disrepair, add a footnote to the form describing the type of asset(s), total cost and book values, and the donor or recipient (if applicable).
  • Promotional Items to Members (e.g., t-shirts and hats): Describe the type and amount of promotional items purchased and given to members. You do not need to name names but a general description of who received the items is sufficient such as union members. Although not required for reporting purposes, the DOL requires that unions maintain an inventory of such items that were purchased and not yet given away. Further, the union should have the names of each recipient in its records.
• Item 18 asks if the labor organization had any changes in its constitution and by-laws, other than dues or procedures. This is as straight forward as it gets, but, if you answer yes, remember to attach a copy of the revised constitution and/or by-laws when you submit the form. For local unions, the question is generally asking about your local union by-laws and not the constitution of the national or international union. Parent organizations submit constitution changes while local unions report by-law changes. Remember that unions should report changes only in the period the revised by-laws are effective which might be different than the period approved by your membership.

In addition to these pointers on certain questions, we offer the following observation to help you comply with your filing requirement: For LM-2 and LM-3 filers, loans to officers and employees must be reported on your annual filing. For LM-3 filers it is a question and for LM-2 filers it is a schedule. We want to point out that loans can occur in ways often overlooked by filers. As an example, unions who provide credit cards to officers and employees can have a loan if a non0union related charge is placed on the union’s credit card and the non-union charge isn’t paid by the officer or employee before the union pays the credit card bill. Alternatively, to avoid a loan, the officer or employee could also write a personal check to the union’s credit card company provided it is paid timely. If neither of these payments occur by the officer or employee, the amount of the charge is considered a loan if over $250 and must be reported even if it is repaid at a later date.

If you are uncertain how to address these items, then it is best to consult with a professional that is well versed in the nuances of these forms, like Withum’s labor organization specialists.

Author: Ashleigh Hall, CPA | [email protected]