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May 26, 2009 - In an expected move, the government asked for a reversal of the jury’s decision in favor of Community First Credit Union in the trial challenging unrelated business income tax (UBIT).
In the suit, Community First Credit Union (Appleton, Wisc.) requested that the Internal Revenue Service (IRS) refund taxes paid on income from the sale of credit life and credit disability insurance and guaranteed auto protection (GAP). The jury favored the credit union and concluded that the insurance products are related to the mission and purpose of the credit union and therefore are not taxable.
The U.S. Department of Justice, representing the IRS, contends that there was no “legally sufficient basis” for a “reasonable” jury to have found in favor of the credit union. The jury agreed with the credit union that the insurance products are related to the credit union’s purposes under Wisconsin state law and are connected to the loans made by Community First.
In late April, U.S. District Court Judge William Griesbach issued a preliminary jury ruling that was favorable to the credit union. Community First is expected to respond to the government’s request and NASCUS will provide updates as information becomes available. To read more about UBIT, follow this link.
NASCUS will continue its work to defend against preemption in its advocacy efforts on behalf of state regulators and state-chartered credit unions on the regulatory and legislative levels.
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