The IRS erroneously levied the unrelated business income tax on three financial products sold by the Community First Credit Union, a federal jury in Green Bay, Wis. ruled yesterday.
An eight-member 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.
Community First had maintained that its sale of credit life insurance, credit disability insurance and Guaranteed Auto Protection insurance were 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.
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The government has 10 days to file a petition to ask for a judgment as a matter of law in which the judge could rule that the jury made the wrong legal decision. After that, the case could be appealed to U.S. Court of Appeals for the seventh circuit.
In another UBIT lawsuit, Bellco Credit Union of Greenwood, Colo. is requesting a refund of $199,000 in taxes paid. That case will be tried in Denver, but no date has been scheduled.
CUNA Executive Vice President and General Counsel Eric Richard praised the verdict.
"It's a great victory for the dual chartering system, and we hope that it causes the IRS to reconsider its position. Meanwhile, on to Denver," he said.
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