IRS Concedes on UBIT
After a 15-year effort, and two cases lost in federal court, the IRS has apparently conceded defeat in the unrelated business income tax battle with credit unions.
CUNA announced April 9 that the IRS issued a memo late last month that frees products that include GAP and accident insurance, card interchange fees, ATM per-transaction fees and interest on credit card loans, among other items, from being subject to the UBIT.
“The IRS memo signals that credit union tax refunds for past UBIT payments should now be processed,” Larry Blanchard, a CUNA Mutual Group consultant and chairman of a coalition of industry groups that supported the litigation, said in the announcement.
The CUNA announcement also advised credit unions to discuss with their tax advisers whether to make future tax payments to the IRS on the same products.
In the Community First case, an eight-member jury ruled in May 2009 that the government must refund Community First Credit Union of Appleton, Wis., $54,604 paid in UBIT on sales of financial products.
In the Bellco case, a federal judge ruled that the credit union didn't have to pay the UBIT on income from credit insurance or royalties from accidental death and dismemberment insurance
Blanchard said the committee will continue to press the IRS to clarify guidance to examiners.