IRS Speaks On UBIT Again

Revenues from shared-branching arrangements are among the items subject to the unrelated business income tax, according to an IRS technical advice memorandum. The IRS memorandum also said that management services to other credit unions, certain CUSOs and sales of financial management services and certain insurance products are subject to the UBIT. The IRS said that the fees that the CUs derived from shared branching should be taxable because they are primarily for the purpose of generating income and for the benefit of the nonmember user rather than for the benefit of the membership. The IRS also said that the sale of certain financial products “does little more than produce income and don’t contribute to the credit union’s mission of ‘promoting thrift and providing low-cost credit.’” But parts of the memorandum, which was issued privately but made public this week, is at odds with a federal court verdict issued later in May that stated that insurance products aren’t subject to the UBIT. That suit was filed by Community First Credit Union of Appleton, Wis., which successfully sought a refund of $54,604 in back taxes. CUNA General Counsel Eric Richard said CUNA’s UBIT steering committee is considering all of its options, including filing a lawsuit. –[email protected]