WASHINGTON (6/13/12)--In a communication that appears to respond to credit union and Credit Union National Association (CUNA) concerns regarding recent Form 990 issues, the U.S. Internal Revenue Service (IRS) has advised any state credit unions that have received letters claiming to revoke their tax exemption, or whose tax status has been actually revoked, to contact the agency and/or apply for reinstatement of their tax-exempt status, depending on their situations.
The IRS in guidance posted to its homepage advised credit unions that believe their tax-exempt status has been erroneously revoked to contact the IRS. The tax agency recommended that credit unions "explain the situation and provide the information required to update IRS records." State-chartered credit unions whose tax status has been actually revoked because they did, in fact, fail to file Form 990 for three consecutive tax years must apply for reinstatement, the IRS added.
A list of credit unions who have received automatic revocation letters is also provided on the web page.
While consolidating this tax issue information into one spot is a good first step, CUNA General Counsel Eric Richard said the IRS actions fail to address one situation: that of federal credit unions that have received revocation letters, or been placed on the list, because they file Form 990-T in claiming the health insurance premium tax credit.
Federal credit unions that wish to claim health insurance premium tax credits are required to file Form 990-T, and the filing of these forms apparently triggers a search by the IRS computer for past Form 990 filings. Under U.S. Internal Revenue Code, section 501(a) exempt organizations are required to report their gross income, receipts, and disbursements on IRS 990 forms.
If no Form 990 filings are found in the records, an exemption revocation letter is automatically sent to the credit union. However, Richard has noted, federal credit unions are not required to file Form 990 and should not be receiving these letters.
CUNA continues to work on this issue, and earlier this year urged the tax agency address this issue as soon as possible. The 2012 deadline for Form 990-T filings passed on May 15.