PEWAUKEE, Wis. – The Wisconsin Bankers Association is calling a credit union lawsuit against the Internal Revenue Service (IRS) over the Unrelated Business Income Tax (UBIT) another example of credit unions seeking to avoid paying taxes. That has led to a statement from the Wisconsin Credit Union League that the banks are again “distorting the facts to promote their anti-consumer, tax-increase agenda.”
Wisconsin-based Community First Credit Union is the plaintiff in the suit, which has broader implications for all credit unions subjected to the UBIT. As it has in the past, the Wisconsin bankers said Wisconsin credit unions are denying the state millions of dollars in tax revenue.
“That’s simply not true,” said WCUL CEO Brett Thompson. “Wisconsin credit unions pay millions in taxes annually. The lawsuit isn’t about money, but serving members.”
In its case, Community First is seeking a refund of $54,000 that the IRS claimed was owed based on the sale of credit life and credit disability insurance and guaranteed auto protection (GAP) insurance. The suit also seeks to achieve legal clarification about what might be subject to UBIT. The credit union position is credit unions are not liable for the tax.
“It’s really Wisconsin banks that have been in the hot seat when it comes to state taxes,” Thompson added, noting that more than 87 Wisconsin banks challenged the state Department of Revenue over the past few years – ultimately reaching settlements – when the agency claimed they had been using subsidiaries with no purpose other than to avoid paying state taxes.
