Court Declines to Follow Sherwin-Williams in VEBA UBTI Issue

The United States Court of Federal Claims ruled that a VEBA’s investment income may be considered set aside under Section 512(a)(3)(E) and therefore subject to┬áthe unrelated business taxable income if the amounts set aside to pay benefits exceed the account limits under Section 419A.

Document Excerpt

A voluntary employees’ beneficiary association (VEBA) may not avoid the limitation on exempt function income in 26 U.S.C. Section 512(a)(3)(E)(i) merely by allocating investment income toward the payment of welfare benefits during the course of the tax year.


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