IRS Doesn't Appeal UBIT Decision
The Internal Revenue Service let yesterday's deadline for appealing the verdict against it in the lawsuit filed by Community First Credit Union pass without appealing.
In May, a federal jury ruled that the IRS erroneously levied the unrelated business income tax on three financial products sold by Community First Credit Union. The jury ruled that the government must refund the Appleton, Wis.-based credit union $54,604 that it paid for UBIT on sales of financial products.
"Clearly, the government was unwilling to expose its reasoning to review by the Court of Appeals even though it had an absolute right to obtain this appellate review," said CUNA General Counsel and Executive Vice President Eric Richard. Now accountants and tax advisers to credit unions have this court decision as substantial authority that UBIT is not due on credit life insurance, credit disability insurance and guaranteed asset protection products.
Community First had maintained that its sale of the three products was substantially related to its tax-exempt mission. The government had maintained that those sales were taxable. The UBIT is only levied on state-chartered credit unions.
Another UBIT case is scheduled to go trial in a federal courtroom in Denver in December. Bellco Credit Union of Greenwood, Colorado sued the IRS and is asking for a refund of $199,000 in taxes paid. Last month, there were oral arguments in that case on a motion for summary judgment but the judge hasn't issued a decision.