Stamford CU Converts Back to Federal Charter to Avoid UBIT Audit

STAMFORD, Conn. – Two years after it was approved by the state Department of Banking to convert from a federal to state charter – and 19 years after it was approved to convert from a state to federal charter – Stamford CU received approval on Sept. 5 from the banking department to convert back to a federal charter to avoid being audited by the Internal Revenue Service for Unrelated Business Income Tax. At press time, Stamford CU President/CEO Ray Dowling was unavailable for comment, but Howard Pitkin, administrator of depository institutions for the Connecticut Department of Banking confirmed that Dowling’s reason for filing for the charter conversion in March “was largely a UBIT issue.” Pitkin added that, “It was a call Dowling had to make to decide which credit union charter best serves the credit union’s members’ needs. That’s the reason there are two types of charters available for credit unions to use.” Before the $45-million credit union converted in August 2001, it was known as Stamford Municipal Employees FCU. However, it was originally chartered in 1953 as a state-chartered credit union, Stamford Municipal Employees CU. When it converted to a state charter in 2001, Dowling said Connecticut’s state charter gave the credit union more latitude to made product and services changes, as well as to its field-of-membership if necessary. Pitkin said there is no maximum number of times a credit union can convert between a state and federal charter, “however I have to assume it creates a lot of turbulence for a credit union’s members because having them vote for the charter conversions could potentially be confusing.” Pitkin said he was sure Stamford CU’s decision to convert back to a federal charter had nothing to do with the credit union’s dissatisfaction with the Department of Banking or the state credit union law. “It was a UBIT-related decision. The credit union charter should fulfill the credit union’s business needs. If they felt members would be better served by a federal charter, then they have the right to convert.” -