IRS Issues More UBIT Guidelines For State Charters

WASHINGTON - The IRS released three more technical advice memoranda regarding individual credit unions' activities subject to unrelated business income tax, or UBIT, two of which exclude collateral protection for car loans from tax liability.

As the memoranda, dated March 9, address individual institutions, IRS categorizes them as "non-precedential," which means they are not applied broadly to all state-chartered credit unions. Only state-chartered credit unions are subject to UBIT.

In all, five TAMs have been released over the past few weeks. All five exclude income from check sales from UBIT. On the other hand, they variously stated that the opposite is true for sales of credit life and disability insurance; accidental death and dismemberment insurance; MEMBERS financial management services; car warranties; guaranteed auto protection, or GAP, insurance; and dental and cancer insurance.

State-chartered credit unions have been grappling with the IRS for two decades to determine what activities may be taxable under UBIT but the IRS has until now refused to provide detailed guidance.

CUNA is exploring a lawsuit challenging some of the guidelines in the recent TAMs.