IRS testimony may shed light on UBIT
WASHINGTON (11/3/05)--When testifying at this morning's House Ways and Means Committee hearing, the Internal Revenue Service (IRS) may provide insight into its views on unrelated business income tax (UBIT) as it applies to state-chartered credit unions.
The Credit Union National Association (CUNA), CUNA Mutual Group, the American Association of Credit Union Leagues (AACUL), and the National Association of State Credit Union Supervisors (NASCUS) have requested and are awaiting a technical advice memorandum from IRS with clearer guidance on revenue-producing activities it considers subject to UBIT.
Recent discussions the groups have had with IRS officials have indicated the agency has solidified its thinking on UBIT and is close to issuing guidance. The IRS witness at the Nov. 3 hearing may give an early indication of what will be in the technical memorandum, including a more definitive position on how UBIT applies to specific credit union product lines.
Based on their discussions with IRS, CUNA and the other groups working on UBIT feel the tax agency is open to persuasion to the position that debit and credit interchange fees, ATM fees from a credit union's own members, and income from the sale of checks to members should not be subject to UBIT, according to CUNA General Counsel Eric Richard. He added that they remain concerned where the agency may come down on some insurance products and income from financial planning products, and ATM fees from nonmembers.
"We expect to continue our discussions with the IRS and will be reviewing the agency's testimony today with great interest," said Richard.
Whether IRS plans to resume auditing credit unions in 2006 is another issue they will be watching for when the agency testifies.
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