The IRS is demanding the Laborers' Int'l Union of N. Am. pay $2,273,876 for back income taxes from 1987-90 and 1993-96 and $618,510 in penalties. The IRS says that fees paid to LIUNA by its subordinate Nat'l Postal Mail Handlers Union constitute taxable business income unrelated to the purpose for which LIUNA is tax exempt. LIUNA filed a petition in U.S. Tax Court in Washington Jan. 24 to reverse the IRS decision.

The 50,000 member NPMHU has been a division of LIUNA since 1969. Since 1963, it has operated a government-wide health insurance plan that federal employees may join even if they aren't postal employees. The plan now has 1 million members.

To be in the plan, non-postal employees must become NPMHU associate members. They pay dues to locals, but don't have a voice or a vote in union affairs. For each associate member, NPMHU began paying LIUNA a $3.60 fee in 1987 and then $4 in 1992.The IRS says by collecting these fees, LIUNA has engaged in "an activity that constituted a trade or business."

Associate members don't receive conventional union "services and support" from LIUNA; and thus, they're merely members of the health plan.LIUNA claims that the desire to make profits is not present and that the fee furthers LIUNA's tax-exempt purpose. [Non-Profit Times 3/00]