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

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

Blanchard said the IRS backed off the inclusion of debit and credit card interchange fees, check printing and collateral protection insurance, but the likelihood of the agency changing its mind altogether on taxation is slim. “The IRS has reached some wrong conclusions on credit union activities and the next step is to seek redress through the courts and challenge the agency's misguided reasoning. It will take credit unions' cooperation for it to be successful,” he stated.

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

The steering committee, comprised of representatives from NASCUS, CUNA, AACUL and CUNA Mutual, is seeking suitable candidates to become plaintiffs.

A credit union's membership composition, reputation and philosophy of serving members and its level of income will be weighed in determining its suitability as a plaintiff. “We need multiple plaintiffs to step forward for maximum flexibility as we put our case together,” he said, adding that the steering committee believes its legal position on the issues “is strong.”

The IRS has identified a number of financial products provided to members by state-chartered credit unions that it says are subject to UBIT. Specifically cited were securities and investment products, credit life and disability insurance, accidental death and dismemberment insurance, car warranties, and guaranteed auto protection (GAP) insurance.

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

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