Credit unions that received a notice from the IRS informing them that their tax-exempt status had been revoked due to improper filing now have specific instructions on how to have it restored.
The IRS replied to a request from CUNA, CUNA Mutual and the American Association of Credit Union Leagues in a letter dated Aug. 1 after several state-chartered, and some federally chartered credit unions, were notified they would lose their tax exempt status after failing to file required 990 forms for three consecutive years.
Lois Lerner, IRS director of exempt organizations, addressed three instances of tax exempt revocation, which include state-chartered credit unions that had group Form 990 returns filed by a parent organization on their behalf, federal credit unions that had converted from a state charter, and federal credit unions that filed 990-T forms to claim health insurance premium tax credits.
In the case of the first group, the IRS admitted it had erroneously notified credit unions their tax-exempt status had been revoked, and sent a follow-up letter to the affected credit unions informing them of the mistake. As such, they are not required to apply for recognition exemption but rather continue to claim the exemption, provided they continue to file the required forms, Lerner said.
Federal credit unions that failed to notify the IRS of their charter conversion were placed on the revocation list because the Treasury Department didn't realize they were no longer subject to state-chartered filing requirements.
To update a credit union's IRS status, the organization must prepare a request, signed by an officer, to have its account updated, Lerner said. The request should include a printout from the NCUA's website showing it is now a federally chartered credit union, according to the letter.
When federal credit unions filed Forms 990-T to claim health insurance premium tax credits, in some cases the filings prompted an automated search for past Forms 990, which were not required. Lerner said the agency is working to address this issue internally, and, in the meantime, said impacted credit unions could contact the agency directly to reverse the revocation.
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