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A complaint was filed in federal court January 15 by Community First Credit Union in Appleton, Wisconsin against the Internal Revenue Service (IRS) on unrelated business income tax (UBIT). Community First is seeking a refund of taxes paid on income from several insurance products subject to UBIT.
In the suit, Community First is requesting that the IRS refund $54,000 to the credit union in taxes paid on income from the sale of credit life and credit disability insurance and guaranteed auto protection (GAP). Community First asserts that these products are related to the mission and purpose of the credit union and therefore should not be subject to UBIT.
The UBIT Steering Committee, of which NASCUS is a member, disagrees with the IRS’ application of UBIT and has long challenged the IRS on its interpretation of UBIT. “The IRS must understand that credit unions offer certain products to their members in an effort to promote thrift and savings, as a part of the credit union’s purpose,” said NASCUS President and CEO Mary Martha Fortney. “NASCUS disagrees with the IRS’ interpretation of what’s related to a credit union’s business and supports this lawsuit and other continued efforts to challenge UBIT.”
Community First filed the suit in the U.S. District Court for the Eastern District of Wisconsin. The suit explains that if these two types of income are treated as substantially related to the exempt purposes of the credit union, Community First is entitled to a refund from UBIT paid.
Litigation is part of the UBIT Steering Committee’s long-standing strategy to challenge the IRS’ interpretation of UBIT. The UBIT Steering Committee has worked through several administrative channels resulting in success on a number of positive UBIT exemptions including check printing and interchange fees from debit and credit unions. To read more about UBIT, click here (Member log-in required.)
NASCUS will continue to provide updates on the suit as news develops on its Web site at http://www.nascus.org. View NASCUS President and CEO Mary Martha Fortney's statement on the UBIT litigation here.
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