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IRS Uses Alabama CU Case to Bolster UBIT Argument

While it is still fuzzy on how CUSOs figure in unrelated business income tax, the IRS has repeatedly turned to a 1986 Alabama Central Credit Union case involving group life insurance to make its case.

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While it is still fuzzy on how CUSOs figure in unrelated business income tax, the IRS has repeatedly turned to a 1986 Alabama Central Credit Union case involving group life insurance to make its case.

At issue is a credit union referred to as “T, a state-chartered credit union,” in a May 5 IRS technical advice memorandum, which had a contract through its CUSO with a smaller, newly-created CU to manage its operational systems. As a result, the CUSO derived fee income and interest income.

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