The Unimportance of Being a VEBA: Tax Attributes of Nonexempt Welfare Benefit Trusts

25 Pages Posted: 19 Aug 2011

See all articles by Andrew Stumpff Morrison

Andrew Stumpff Morrison

University of Michigan Law School; University of Alabama Law School; Washington University in St. Louis - School of Law

Date Written: May 1, 1993

Abstract

The proper tax treatment of a fully taxable welfare benefit trust – as opposed to the more common tax-exempt voluntary employees' beneficiary association ("VEBA") – is unsettled. This article explores the theories under which such a trust might be taxed, and demonstrates that if the ordinary trust tax rules apply, the presumed advantages of tax-exempt status as a VEBA may in many cases, surprisingly, be nonexistent. The article evaluates the arguments for and against taxation of a nonexempt welfare benefit trust as an ordinary trust, and concludes that the stronger arguments appear to support this (as opposed to taxation as a grantor trust or insurance company, for example) as the appropriate taxation theory.

Keywords: VEBA, employee benefits, health insurance, voluntary employees' beneficiary association, grantor trust, trust taxation, welfare benefits, 419, 419A

JEL Classification: K34

Suggested Citation

Morrison, Andrew Stumpff, The Unimportance of Being a VEBA: Tax Attributes of Nonexempt Welfare Benefit Trusts (May 1, 1993). Tax Lawyer, Vol. 47, No. 1, 1993, Available at SSRN: https://ssrn.com/abstract=1912193

Andrew Stumpff Morrison (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

University of Alabama Law School

101 Paul W. Bryant Dr.
Box 870382
Tuscaloosa, AL 35487
United States

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States

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