Tuesday, June 22, 2010

Fed Courts Update: ACORN, Credit Union, and Charity Subject to Terrorism Investigation Win

We previously blogged about ACORN's lawsuit challenging Congress attempt to defund it, Bellco Credit Union's UBIT battle with the IRS, and KindHearts' struggle to regain control of its assets, frozen when the U.S. Treasury Department's Office of Foreign Assets Control opened an investigation into whether that group should be designated as a terrorist organization.  Some of this information is a bit dated, but I thought our readers would appreciate learning how those cases turned out (short story: all three groups won, at least to some extent):

  • As covered extensively in the credit union press (see Credit Union Magazine, Credit Union Times), Bellco Credit Union(mostly) won its case challenging the IRS' determination that certain income streams were subject to unrelated business income tax.  More specifically, a federal district court concluded in a bench trial that UBIT did not apply to credit insurance income or royalties from accidental and death and dismemberment insurance.  The court hadpreviously concluded that UBIT also did not apply to financial services income from the provision of products and services to Bellco's members, although it did apply to such income from non-members and certain other income from other entities. In its most recent decision, the court also concluded that UBIT applied to credit insurance sales income that came through another entity.  The decision is unfortunately not available for free, but is available through electronic databases such as Westlaw.

UPDATE:  A reader notes that "The Bellco decisions are readily accessible through PACERThe ruling on cross motions for summary judgment, back in November of 2009, is 35 pages, and the final ruling in April of 2010 is 38 pages. Usually final decisions are free [although the read is not positive they are for the court that issued these rulings], and anything else is eight cents a page."

  • The ACLU, which represents KindHearts for Charitable Humanitarian Development, Inc., announced that a federal district court confirmed its earlier ruling that the Treasury Department's freezing of KindHearts' assets violated the Constitution and ordered that the government must obtain a warrant based on probable cause before seizing an organization's assets, even when the organization is suspected of supporting terrorism.  The court's opinionrejected government criticism of its earlier ruling, but concluded both that the government would be given an opportunity to make a post-hoc probable cause showing (to remedy the Fourth Amendment violation) and to produce sufficient evidence to give KindHearts adequate notice and opportunity to respond (to remedy the Fifth Amendment violation).  The court also remandedto the Office of Foreign Assets Control (OFAC), with specific instructions, the issue of the amount of assets that should be released to pay KindHearts' attorney fees, and left in place its previous stay preventing the government from proceeding with terrorist organization designation proceedings against the group.

LHM

http://lawprofessors.typepad.com/nonprofit/2010/06/fed-courts-update-acorn-credit-union-and-charity-subject-to-terrorism-investigation-win-1.html

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Comments

the bellco decisions are readily accessible through PACER. the ruling on cross motions for summary judgment, back in november of 2009, is 35 pages, and the final ruling in april of 2010 is 38 pages. usually final decisions are free, and anything else is eight cents a page. i have copies on .pdf if you want them.

Posted by: r. | Jun 24, 2010 2:11:55 PM

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