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WISCONSIN CREDIT UNION SUES TO ESCAPE UBIT

March 07, 2008

A Wisconsin credit union has filed a suit to recover $54,000 in "unrelated business income tax" paid on income earned from the sale of credit life and disability insurance and "guaranteed auto protection" insurance.

While credit unions are normally exempt from federal taxes, the IRS has been assessing UBIT on some non-lending activities of credit unions. UBIT is, more or less, the corporate income tax imposed on non-exempt activities of tax exempts, to prevent taxable businesses from having to cope with tax-free competitors. The IRS says that side activities, like insurance sales, are unrelated to the core function of credit unions.

You can read the credit union's petition here.

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