WASHINGTON — The IRS has determined that credit card interchange fees are “substantially related” to the business of a credit union and therefore not subject to unrelated business income tax.

The IRS released 12 Technical Advice Memoranda June 22, which reiterated some of the IRS' stands on credit union activities subject to UBIT, but also cleared credit card program interchange fees from coverage. “Making interest-bearing loans to members is a traditional activity of exempt credit unions,” one of the TAMs read. “Credit unions originally made unsecured personal loans to members. Because of changes in the financial marketplace and the expanded needs of financial institutions customers, today all the types of loans made by [the unnamed credit union]…are recognized as substantially related to the exempt purposes and functions of [the credit union].”

The TAM continued, “Therefore, any net income, after deduction of related expenses arising from the card program, specifically including but not limited to the interchange fees generated by merchant purchases, is not subject to unrelated business income tax.”