WASHINGTON — A federal judge has delayed the trial of BellcoCredit Union's lawsuit against the IRS over $199,000 in unrelatedbusiness income taxes paid.
U.S. District Judge Christine Arguello vacated the original date ofAug. 31. She has not set a new one but said she would do sosometime after a status conference between the two sides scheduledfor June 19.
The Greenwood Village, Colo.-based credit union is disputing thetaxes it paid in 2000, 2001 and 2003 based on revenue generatedfrom sales of credit life and credit disability insurance duringthose years. Bellco is also claiming a refund for taxes based onrevenue from the sales of accidental death and disability insuranceand from its involvement in CFS Member Financial Services in2003.
Bellco's suit is the second credit union-originated lawsuit on thisissue.
Community First Credit Union's lawsuit over the IRS' interpretationof UBIT with regard to credit unions is scheduled to be heard May11. The case filed by the Appleton, Wis.-based credit union is setto be heard in U.S. District Court in Green Bay.
Community First is seeking a refund of $54,000 that the IRS claimedwas owed based on the sale of credit life and credit disabilityinsurance and guaranteed auto protection insurance. The creditunion contends that the IRS should not have levied UBIT on theseservices because they are financial services that help mitigate thelosses to the credit union, enable the credit union to grant loansand thus further the mission of credit unions.
CUNA Executive Vice President and General Counsel Eric Richard saidit's not clear what UBIT interpretation the Treasury Departmentwill follow in the Obama administration. “Until we know who thesub-cabinet appointees will be, there is a vacuum on the issue,” hesaid.
CUNA officials have met with IRS officials below the level of thecommissioner to persuade them to interpret the law in a way thatdoes not disadvantage credit unions that offer certain financialproducts.
Richard said CUNA hopes the next administration will clear thingsup so there are fewer mixed signals.
“The Treasury Department doesn't like it when insurance productsare sold by depository institutions, but Congress likes the factthat we can do things on a nonprofit basis,” he noted.
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