FORT LAUDERDALE, Fla. — What the credit union movement needs isa few good plaintiffs, Larry Blanchard said to NASCUS attendeeshere for the organization's State System Summit.

Blanchard, senior vice president of CUNA Mutual Group, and chairof the industry's Unrelated Business Income Tax Steering Committee,said the committee would continue to seek an administrativesolution to the issue, and will try to work with the IRS to changeits decision. But if that fails, state-chartered credit unions willhave no option other than to rid themselves of the UBIT threat bymaking a court challenge to the IRS. That will require several thatare willing to step forward.

Blanchard said the IRS backed off the inclusion of debit andcredit card interchange fees, check printing and collateralprotection insurance, but the likelihood of the agency changing itsmind altogether on taxation is slim. “The IRS has reached somewrong conclusions on credit union activities and the next step isto seek redress through the courts and challenge the agency'smisguided reasoning. It will take credit unions' cooperation for itto be successful,” he stated.

“What we need is for credit unions to step forward and volunteerto be plaintiffs in a case against the IRS. Some have alreadystepped forward, but we need others,” Blanchard said.

The steering committee, comprised of representatives fromNASCUS, CUNA, AACUL and CUNA Mutual, is seeking suitable candidatesto become plaintiffs.

A credit union's membership composition, reputation andphilosophy of serving members and its level of income will beweighed in determining its suitability as a plaintiff. “We needmultiple plaintiffs to step forward for maximum flexibility as weput our case together,” he said, adding that the steering committeebelieves its legal position on the issues “is strong.”

The IRS has identified a number of financial products providedto members by state-chartered credit unions that it says aresubject to UBIT. Specifically cited were securities and investmentproducts, credit life and disability insurance, accidental deathand dismemberment insurance, car warranties, and guaranteed autoprotection (GAP) insurance.

“It will take a united front to beat this threat to creditunions. If you're mad as heck and don't want to take it anymore,contact us,” he said.

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