Credit Unions Win Two Test Cases Regarding Unrelated Business Income Tax
Served as lead trial counsel in two federal tax “test cases” for the credit union industry, challenging recent IRS determinations that the sale of debt protection and financial service products by credit unions are subject to unrelated business income tax (UBIT). In Community First Credit Union v. United States (E.D. Wis.), after a four-day, 15-witness trial, a unanimous federal court jury in Green Bay, Wisconsin returned a special verdict on May 14, 2009, ruling in favor of Community First on all claims and rejecting the government’s UBIT position. In the second tax refund suit, Bellco Credit Union v. United States, pending in U.S. District Court in Denver, Colorado, the district court on November 12, 2009 granted partial summary judgment that revenues received by Bellco from the sale of financial services and investment products to its members are also not subject to UBIT. Following a bench trial, the district court ruled on April 2, 2010 that Bellco’s revenues from the sale on credit insurance on both direct and indirect lending were not subject to UBIT and that revenues received from a direct mail offering of accidental death and dismemberment insurance by a third party were royalties also exempt from UBIT. The government has appealed.