Credit unions that received a notice from the IRS informing themthat their tax-exempt status had been revoked due to improper filing now have specific instructionson how to have it restored.

The IRS replied to a request from CUNA, CUNA Mutual and theAmerican Association of Credit Union Leagues in a letter dated Aug.1 after several state-chartered, and some federally charteredcredit unions, were notified they would lose their tax exemptstatus after failing to file required 990 forms for three consecutive years.

Lois Lerner, IRS director of exempt organizations, addressedthree instances of tax exempt revocation, which includestate-chartered credit unions that had group Form 990 returns filedby a parent organization on their behalf, federal credit unionsthat had converted from a state charter, and federal credit unions that filed 990-T formsto claim health insurance premium tax credits.

In the case of the first group, the IRS admitted it had erroneously notified credit unions their tax-exempt status hadbeen revoked, and sent a follow-up letter to the affected creditunions informing them of the mistake. As such, they are notrequired to apply for recognition exemption but rather continue toclaim the exemption, provided they continue to file the requiredforms, Lerner said.

Federal credit unions that failed to notify the IRS of theircharter conversion were placed on the revocation list because theTreasury Department didn't realize they were no longer subject tostate-chartered filing requirements.

To update a credit union's IRS status, the organization mustprepare a request, signed by an officer, to have its accountupdated, Lerner said. The request should include a printout fromthe NCUA's website showing it is now a federally chartered creditunion, according to the letter.

When federal credit unions filed Forms 990-T to claim health insurance premium tax credits, in some cases the filingsprompted an automated search for past Forms 990, which were notrequired. Lerner said the agency is working to address this issueinternally, and, in the meantime, said impacted credit unions couldcontact the agency directly to reverse the revocation.