WASHINGTON–A federal judge has delayed the trial date of a Colorado credit union's lawsuit against the IRS over the tax agency's application of the Unrelated Business Income Tax (UBIT).
State-chartered credit unions have been fighting the IRS for decades over what is taxable under UBIT, with credit unions claiming services and products like insurance sales, ATM fees and others are related to the core business of credit unions, and so are exempt from UBIT.
The $1.8-billion Bellco CU filed its suit disputing IRS assessments for its sale of credit life disability insurance, accidental death and disability insurance and revenues it earned from its CFS Financial Services operation and is seeking repayment of $199,000 in back taxes, penalties and interest. Bellco’s suit fcame on the heels of a similar action against the IRS by Community First CU, Madison, Wis. The Bellco case had been set for Aug. 31, 2009. A new date has not been set.
“We have no reason to believe that the judge's action says anything about how this case is likely to turn out. Courts often reschedule trials just to manage their overall workload,” said CUNA General Counsel Eric Richard. “We anticipate the credit union party to the case will seek a prompt trial date at the appropriate time.”
