U.S. District Judge Christine Arguello vacated the original date of Aug. 31. She has not set a new one but said she would do so sometime after a status conference between the two sides scheduled for June 19.
The Greenwood Village, Colo.-based credit union is disputing the taxes it paid in 2000, 2001 and 2003 based on revenue generated from sales of credit life and credit disability insurance during those years. Bellco is also claiming a refund for taxes based on revenue from the sales of accidental death and disability insurance and from its involvement in CFS Member Financial Services in 2003.
Bellco's suit is the second credit union-originated lawsuit on this issue.
Community First Credit Union's lawsuit over the IRS' interpretation of UBIT with regard to credit unions is scheduled to be heard May 11. The case filed by the Appleton, Wis.-based credit union is set to be heard in U.S. District Court in Green Bay.
Community First is seeking a refund of $54,000 that the IRS claimed was owed based on the sale of credit life and credit disability insurance and guaranteed auto protection insurance. The credit union contends that the IRS should not have levied UBIT on these services because they are financial services that help mitigate the losses to the credit union, enable the credit union to grant loans and thus further the mission of credit unions.
CUNA Executive Vice President and General Counsel Eric Richard said it's not clear what UBIT interpretation the Treasury Department will follow in the Obama administration. "Until we know who the sub-cabinet appointees will be, there is a vacuum on the issue," he said.
CUNA officials have met with IRS officials below the level of the commissioner to persuade them to interpret the law in a way that does not disadvantage credit unions that offer certain financial products.
Richard said CUNA hopes the next administration will clear things up so there are fewer mixed signals.
"The Treasury Department doesn't like it when insurance products are sold by depository institutions, but Congress likes the fact that we can do things on a nonprofit basis," he noted.