WASHINGTON (2/24/09)—Internal Revenue Service (IRS) Commissioner Douglas Shulman was asked to comment on the contrast between the IRS’s recent expansion of tax deductions for commercial banks and the agency’s simultaneous attempts to expand the application of the Unrelated Business Income Tax to credit unions, in a letter from Credit Union National Association (CUNA) President/CEO Dan Mica. The CUNA letter was a follow up to the group’s query last week at an Exchequer Club luncheon at which the IRS Commissioner spoke and then welcomed questions. CUNA Counsel for Special Projects Michael Edwards referrer to a series of IRS issuances that included IRS Notice 2008-100, a tax policy document which allows special tax breaks for bank acquisitions. For instance, under the Notice 2008-100 tax guidance, Wells Fargo & Co. received an approximately $79 billion tax deduction because of its purchase of Wachovia Corp. Edwards asked, "How does IRS justify its policy of loosening the tax laws as they pertain to banks, at least in some respects, while simultaneously attempting to expand taxation of credit unions." Shulman responded that the notice was due to "the priorities of the Secretary" at the time, Henry Paulsen, and that he disagreed the bank and credit union issues were comparable. The follow up letter reiterated CUNA’s concern that the IRS “may not understand that credit unions are an integral part of the credit markets, especially for consumers, and have been playing a vital role in keeping credit flowing to consumers.” “Tax policies that undermine credit unions’ ability to lend are completely at odds with current efforts to free up the credit markets and can contribute to pro-recessionary credit shortages,” said the Mica letter. Credit unions, Mica noted, are among the few financial institutions that have done exactly what both the Bush and Obama administrations have wanted and have increased their lending. “This vital contribution to the fight against the credit freeze cannot continue at the same level, however, if credit union dollars are diverted to questionable tax payments imposed by the IRS,” Mica noted. “Every dollar that credit unions must pay toward shaky interpretations of UBIT is a dollar that cannot be directed toward consumer loans, or toward capital adequacy in support of such loans,” the CUNA CEO wrote.