MADISON, Wis.–Credit unions are likely to file a lawsuit against the Internal Revenue Service over the Unrelated Business Income Tax (UBIT) as early as the first quarter of 2008, the Credit Union Journal has learned.
UBIT Steering Committee Chair Larry Blanchard of CUNA Mutual Group said it has been working with several credit unions and expects to be in court sometime in early 2008.
Blanchard explained that the UBIT Steering Committee has been looking for “the right kind of plaintiff” to take on the IRS in court. That would a credit union with a very special blend of the right membership (such as educator or firefighters, for example), that exhibits strong CU philosophy and that has sizable income that could be interpreted as coming under UBIT.
Due to confidentiality agreements in place, Blanchard would not reveal the potential plaintiffs, but noted that the UBIT case, once it’s brought to court, will likely stay in the court system through most of 2008 and possibly even part of 2009.
As part of the IRS’ investigation into all tax-exempt organizations, the agency has audited six CUs in Alabama, 44 in Connecticut, eight in Colorado and one in North Dakota.
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