Wednesday, May 27, 2009
We previously blogged about the test case brought by Community First Credit Unionof Appleton, Wisconsin challenging the IRS position that the sale of credit life and credit disability insurance and guaranteed auto protection insurance resulted in taxable, unrelated business income. The major national Credit Union associations supported the lawsuit, which they characterized as the lead case in the nation on this issue. The Appleton Post-Crescent now reports that the Credit Union has won its case, having successfully proved that the income from these insurance sales is substantially related to the Credit Union's exempt purposes. The article quotes the Credit Union's President as celebrating the victory as one for all state-chartered credit unions and their customers, a sentiment echoed by the Credit Union National Association. While the amount at issue in this case was relatively small ($54,000), the issue appears to be a significant one for many if not most tax-exempt credit unions. According to the Credit Union Times, a second lawsuit raising the same issue is already pending, brought by the Bellco Credit Union of Greenwood Village, Colorado. The IRS does not appear to have commented on the decision or decided whether to challenge it with post-trial motions or an appeal.
(Hat tip: EO Tax Journal)