Group Health Program Co National Telecommunications Cooperative Assoc

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“The program obtained its latest tax exemption letter on october 24, 1975, in which the internal revenue service (irs) stated that the program, as then designed, was in compliance with the applicable requirements of the internal revenue code (irc). While the program has been amended since receiving the exemption letter, the program administrator and the program's erisa counsel believe that the program continues to be designed and operated in compliance with the applicable requirements of the irc. As a voluntary employees' beneficiary association (veba), qualified under irc section 501(c)(9), the program is required to operate in conformity with the irc to maintain its tax-exempt status. The program administrator is not aware of any course of action or series of events that have occurred that might adversely affect the veba tax-exempt status. The program is exempt from federal income taxes under section 501(c)(9) of the irc except for unrelated business income. The program has for-profit member organizations that participate in the program which causes the program to be subject to unrelated business income tax and deferred taxes due to the overfunded status. The amount subject to taxation is based on excess investment income. For the years ended december 31, 2021, and 2020, the program has total current and deferred unrelated business income tax of $947,000 and $1,594,438 and $2,383,663 and $6,468,678, respectively. At december 31, 2021 and 2020, a deferred tax liability of $8,063,016 and $6,468,678, respectively, has been recorded on the cumulative unrealized gain on investments in the veba trust. During 2020, management determined that a deferred tax liability of $6,074,469 was not recognized as of december 31, 2019. As a result, unrelated business income expenses for the year ended december 31, 2020, was overstated by $6,074,469 to recognize the 2019 deferred tax liability that was not previously recognized. Accounting principles generally accepted in the united states of america require program management to evaluate tax positions taken by the program and recognize a tax liability (or asset) if the program has taken an uncertain position that more likely than not would not be sustained upon examination by the irs. The program is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.”