DENVER and WASHINGTON (8/20/10)--The U.S. government has notified a court of appeals that it will dispute a federal judge’s favorable credit union rulings in a case that challenged the Internal Revenue Service’s (IRS) policy toward unrelated business income tax (UBIT) and its application to credit unions. In a suit brought by Bellco CU of Greenwood Village, Colo., Judge Christine M. Arguello ruled in November 2009 that investment products that Bellco sold to its members, including stocks, bonds, mutual funds and annuities, were "substantially related" to Bellco's tax-exempt purposes, and therefore the income from those activities was, under the law, exempt from UBIT. Bellco had challenged the IRS's assertion that UBIT was due on the three products and sought $199,293 in tax refunds from the IRS. The same judge also ruled in April of this year that the income derived from credit life and disability insurance, sold directly or indirectly, as well as royalty income from accidental death and dismemberment (AD&D) insurance should not be subject to UBIT. The Colorado decisions were hailed by the Credit Union National Association (CUNA) as substantial victories in credit union court challenges to the IRS’s UBIT policy. For instance, Arguello’s ruling noted, "In the banking and credit union context, the concept of thrift is tied to sound financial management." "Credit insurance does just that. It permits a borrower to guard against certain difficult circumstances and to know that, if the unfortunate event of death or a serious disability occurs, the borrower's family and/or assets would be protected. For a relatively marginal payment, the borrower buys peace of mind," she added. The government will file its appeal with the U.S. Court of Appeals for the Tenth Circuit. CUNA will be closely monitoring developments. CUNA General Counsel Eric Richard said the government’s announcement that it would appeal may end up being a strong positive for credit unions on the UBIT issue: “We may get a powerful favorable precedent out of this at the Court of Appeals level. Obviously, we will be fighting hard.” Richard is CUNA's representative on the UBIT Steering Committee, which supported Bellco. Other groups on the committee are the American Association of Credit Union Leagues (AACUL), CUNA Mutual Group, and the National Association of State Credit Union Supervisors (NASCUS).