Removing Barriers Blog

Senate Finance Committee Passes Bills Curbing Identity Theft and Tax Refund Fraud
Posted April 21, 2016 by CUNA Advocacy

Yesterday, the Senate Finance Committee passed two bipartisan bills aimed at curbing identity theft and tax refund fraud, as well as legislation designed to protect taxpayers.  By voice vote, the Committee passed the Taxpayer Protection Act of 2016.  This legislation includes many provisions, but two of interest to state-chartered credit unions (SCUs).
All SCUs are required to annually submit a Form 990 to the Internal Revenue Service (IRS).  The bill passed yesterday, if enacted into law, will require all SCUs to file the IRS Form 990 electronically.  Currently, only state chartered CUs that file at least 250 returns (IRS Forms W-2, 1099, etc.) during the calendar year and with total assets of $10 million or more must file electronically.  This will be a new burden on SCUs that currently file their Form 990s by other means, mostly notably through paper forms.  The amount of money the IRS will raise from this provision is literally “negligible” according to the nonpartisan Joint Committee on Taxation.
However, another provision was added to the bill that aids tax-exempt entities that are required to file Form 990s.  Currently, if such an organization, including SCUs, fails to file a Form 990-series return or notice for three consecutive years, that organization’s tax-exempt status is automatically revoked.  To regain their tax-exempt status, the organization must reapply to the IRS for such recognition.  This is a process that no credit union wants to endure.  However, this legislation would require the IRS to provide notice to an organization that fails to file a Form 990-series return or notice for two consecutive years not later than 270 days after the date of the second failure.  The notice must contain information about how to comply with the annual information return and notice requirements.
We will continue our dialogue with Hill lawmakers on increasing tax compliance without adding unfair burdens on the credit union movement.