CU Trades to IRS: Watch Out for Erroneous Automatic Tax Exemption Revocations
Concerned that another round of problems with the Internal Revenue Service’s “automatic revocation process” for federal credit unions’ tax exemption is about to occur, four key credit union groups have written to the tax agency seeking action to head off the process.
In a letter from a law firm representing CUNA, NASCUS, CUNA Mutual Group and the American Association of Credit Union Leagues, the IRS was asked to confirm that steps are “being taken to prevent a significant re-occurrence of the automatic revocations for the federally chartered credit unions filing the Form 990-T.”
The issue arises from federal credit unions’ claiming the health insurance premium tax credit. To do so, federal credit unions are required to file Form 990T – even though, as federal credit unions, they are exempt from filing Form 990 itself.
However, the filing of the form apparently triggers a search by the IRS computer for past Form 990 filings. If none are found for the federal credit union, an exemption revocation letter is automatically sent to the credit union.
“But federal credit unions are not required to file Form 990 and should not be receiving these letters,” said CUNA General Counsel Eric Richard. “It is vital that the tax agency address this issue as soon as possible, and keep such letters from going out.”
May 15 marked the annual deadline for filing a new Form 990 for those organizations that are required to file it.
“The concern is now that we will see a whole new round of erroneous revocation letters from the IRS to federal credit unions because of that filing deadline and the situation that federal credit unions find themselves in, at no fault of their own,” Richard said.