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Government responds in Community First UBIT case
WASHINGTON (3/17/08)—The federal government filed its response last week in a case in which a state-chartered credit union challenged the Internal Revenue Service’s determinations that certain insurance products offered to members fall outside the credit union's main mission and are subject to unrelated business income tax (UBIT). Community First CU vs. the United States of America was filed by the Appleton, Wisc. credit union on Jan. 15. The credit union is seeking a refund of about $54,000 in taxes paid in 2006 on income from several insurance products. The government response appeared not to refute the underlying details submitted by Community First in its pleadings, but, as expected, denied that Community First is entitled to the tax refund it seeks. The U.S. Attorney’s “answer to complaint” requested that the court deny the relief sought by Community First and asked that the complaint be dismissed. The document further requested the court grant “further relief” to the defendant as the court “deems proper and just, including the costs of this action.” The Credit Union National Association (CUNA), along with the rest of the credit union industry’s UBIT Steering Committee, strongly backs the credit union's action and challenges recent opinions issued by the IRS stating that several insurance and investment products are subject to UBIT. The Steering Committee is comprised of CUNA, CUNA Mutual Group, the National Association of State Credit Union Supervisors, and the American Association of Credit Union Leagues. CUNA strongly believes the activities are consistent with state-chartered credit unions' tax exempt purposes and, therefore, not subject to UBIT. Notably, Community First CEO Cathie Tierney received a standing ovation from her peers at a Wisconsin Credit Union League's annual Governmental Affairs Conference just 10 days after the credit union filed its lawsuit. Credit unions’ support of her action was displayed on an even larger scale when Tierney received an ovation by thousands of credit union representatives attending CUNA’s Governmental Affairs Conference here earlier this month. Tierney, at the time the suit was filed with the U.S. District Court for the Eastern District of Wisconsin Green Bay Division, called the decision to sue the IRS "daunting," but said it was made because her credit union believes "unequivocally that these products are integral to our services to members." Use the resource link below to access a free CUNA Webinar on key issues surrounding UBIT for credit unions.


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