Lawyers representing nationwide shared branching networks areworking with CUNA lawyers to respond to a recent move from theInternal Revenue Service that could make income from sharedbranching taxable under unrelated business income tax.

The move came in the form of a technical advice memorandum fromthe agency.

"We are aware of the TAM," said Craig Beach, vice president ofmarketing for CO-OP Shared Branching, the shared branchingaffiliate of CO-OP Financial Services. "We are taking this from thepoint of view of all shared branching so our lawyers with lawyersfrom CUNA are trying to figure out what this might mean for sharedbranching acquirers."

Taking the issue from a network perspective means that CO-OPFinancial Services is working with Financial Service CentersCooperative along with CUNA on the issue.

One of the issues being studied is how much income this mightrepresent, since most credit unions that take in some moneyacquiring shared branching transactions usually pay some out alsowhen their members use other credit union shared branches.

UBIT has been levied on state chartered credit unions by the IRSon the grounds that some activities have been unrelated to work ascredit unions and therefore not covered by their tax exemption. TheIRS application of UBIT to credit unions is currently underchallenge in court.