FORT LAUDERDALE, Fla. -
As you might imagine, there just aren't a whole lot CUs lining up to answer that ad, but that's exactly what the UBIT Steering Committee is looking for, according to CUNA Mutual Group's Larry Blanchard, who heads up the committee tasked with dealing with the IRS' interpretation of which products and services at state-chartered credit unions should be taxed under the Unrelated Business Income Tax.
Blanchard offered an update on the UBIT issue at the NASCUS State System Summit where, when he asked for volunteers to take on the IRS, there was nary a volunteer to be found.
"We are looking for a plaintiff," he said, explaining that this is the second step in a potentially three-step process: administrate, litigate, legislate. But the group isn't looking for just any plaintiff. The right plaintiff, Blanchard said, will have a very special blend of the right membership (such as educators or firefighters, for example), exhibit strong credit union philosophy and have sizable income that could be interpreted as coming under UBIT. And such a plaintiff also needs to be willing to work with the UBIT Steering Committee. "We don't want a well-intended but misguided plaintiff to take this on."
Oh, and one other thing: the credit union should be in a part of the country that would be considered more "credit union friendly" on the UBIT issue. New England and the Midwest, for example, would probably be better than the Southeast for this purpose.
The UBIT issue is one that had the potential to splinter the credit union movement, as federal charters are exempt from UBIT. "There was some tension, some concern that the movement would split over this issue," Blanchard related, but thus far that has not been the case.
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.
Blanchard offered these tips to follow if your credit union comes under audit:
* Designate one senior executive as liaison to the auditor to make sure that the IRS receives a consistent message from the credit union.
* Identify and highlight that you serve your members on a mutual, nonprofit basis.
* Identify the empowering statutes and regulations that support each exempt purpose.
* Identify facts related to each product/service.
* Allocate direct and indirect costs to minimize income.
An accounting tool has been put together to aid credit unions going through this process, and there is a new and improved-and simplified-tool for small credit unions.
"We now have a streamlined accounting tool for small credit unions," Blanchard related. "The existing tool was, well, frightening for small credit unions. It looks something like the time studies of space."
