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The federal court verdict in favor of Community First Credit Union on the unrelated business income tax represents substantial authority that credit life and disability insurance are exempt from the tax, according to an advisory opinion by attorneys for the UBIT Steering Committee.

“Because Community First is ‘substantial authority’ for credit unions to treat credit insurance and GAP as non-taxable activities, we believe a credit union will be exempt from civil penalties if it takes that position, and tax return preparers also will be exempt from civil penalties if they prepare Form 990-T on that basis,” according to the memorandum from the Washington law firm of Foley & Lardner.

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