Credit unions and the IRS are gearing up for post-trial briefs, due Feb. 1, following the close of oral arguments last Friday in the case challenging the IRS' interpretation of unrelated business income tax.
The suit came about when Bello CU was ordered to pay UBIT on the income it made selling credit life and disability insurance, as well as royalties from accidental death and dismemberment insurance. Bellco of Greenwood Village, Colo. is arguing that credit life and disability is substantially related to the tax-exempt purpose of credit unions and that AD&D is merely royalty income, which is not subject to UBIT, according to CUNA General Counsel Eric Richard who attended to proceedings. The credit union is suing for $199,293 in UBIT.
Following the filing of the post-trial briefs, Richard said he expected that U.S. District Judge Christine M. Arguello could take weeks before making a ruling.
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A similar case in Wisconsin involving Community First Credit Union had a happy ending for the credit union when it was awarded a $54,604 return in May of this year on the UBIT it paid. While the judge in the Colorado case is not bound by the Wisconsin decision, Richard said the credit union's attorney, Mike Conway of the Foley & Lardner, cited it extensively for its "persuasive value." The IRS elected not to appeal that case.
Conway also represented Community First. Both efforts have been backed by the UBIT Steering Committee comprising CUNA, NASCUS, CUNA Mutual Group and the AACUL.
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