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IRS responds to exemption revocation issues CUNA
WASHINGTON (8/24/12)--In a letter from its national headquarters to the Credit Union National Association (CUNA) and other system players, the U.S. Internal Revenue Service (IRS) has spelled out the steps that state- and federally chartered credit unions whose tax exemptions have erroneously been revoked should take to reassert their exempt status.

CUNA, the National Association of State Credit Union Supervisors, CUNA Mutual and the American Association of Credit Union Leagues contacted the IRS after the agency last year notified several state-chartered credit unions, and some federally chartered credit unions, that they would lose their tax-exempt status for their alleged failure to file Form 990 tax returns for three consecutive years.

The letter addresses three separate groups of credit unions: State-chartered credit unions that previously had group Form 990 returns filed on their behalf, federal credit unions that recently converted from state charters, and federal credit unions that file Forms 990-T to claim health insurance premium tax credits.

"While individual credit unions have in some cases received similar responses from IRS regional officials, this letter is more authoritative because it comes from the top official of the IRS Exempt Oganizations Division. In that sense, this is a step forward," CUNA General Counsel Eric Richard said.

In a letter, IRS Director of Exempt Organizations Lois Lerner said the agency was wrong to revoke the beneficial tax status of some state-chartered credit unions it had contacted because their group filings had ceased. "Individual state credit unions in each state may continue to hold themselves out as a tax exempt under section 501(c)(14), as long as they continue to file required Forms 990 and otherwise comply with the applicable requirements for tax exemption under the Internal Revenue Code," Lerner said.

These credit unions will not need to apply for recognition of their exemptions with the IRS, but may "choose to do so," Lerner added.

Lerner in the letter said the tax exemptions of some federal credit unions may have also been wrongly revoked due to IRS recordkeeping discrepancies.

First, credit unions that have shifted from state to federal charters may also have similar tax exemption issues because the IRS was not notified of the conversion, and may have been contacted by the IRS, Lerner said. While some credit unions have moved to a federal charter, they are still listed on IRS records as state credit unions, and, thus, are being penalized for failing to file their Forms 990.

These federal credit unions should notify the IRS of their changed status by sending a request detailing:

  • The organization's name, address, and employer identification number;
  • Evidence that the credit union is supervised by the National Credit Union Administration; and
  • The name and title of the credit union officer signing the request.
Correspondence should be faxed to the IRS at 513-263-4330 or mailed to: IRS – TE/GE, Attn: Correspondence Unit, P.O. Box 2508, Cincinnati, OH 45021.

Second, federal credit unions that wish to claim health insurance premium tax credits are required to file Forms 990-T, but federal credit unions are exempt from filing Forms 990.  In some cases, the 990-T filings have resulted in an automated search for past Forms 990. When the IRS did not find previous Form 990 filings in their records, the credit union filing the Form 990-T was contacted and informed that its tax exempt status was in danger of being revoked.

Lerner said the agency is working to address this issue internally, and, in the meantime, said impacted credit unions could contact the agency directly by using the address and other contact information listed above. Credit unions in this situation should supply their name, employer identification number (EIN), and a letter detailing the problem.


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