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LEGAL AFFAIRSUBIT: The saga continues!By Andrew Price, FCUL Director of Legal AffairsAs many of you are aware, on January 15,2008, in Wisconsin, Community First Credit Unionin Wisconsin (not to be confused with our ownCommunity First here in Florida) filed suit against theIRS for a refund of taxes paid on activities that theIRS determined were “unrelated” to the credit unionstax-exempt purpose and function. Thus began a newchapter in the UBIT saga.The complaint in the Community case isbasically seeking a refund of taxes paid in connectionwith Credit Life and Credit Disability Insurance andGuaranteed Auto Protection (GAP) Insurance. Theyhave requested a jury trial. It is likely that this case willtake between 1 and 2 years to wind its way throughthe court system. We do not have any predictions as tothe outcome; however, we believe that there are soundarguments to be made on behalf of the credit unionin this case. We are also expecting other law suits tofollow by other credit unions in the coming months.The date on which the complaint was filed justhappen to coincide with the League’s UBIT conferencein Orlando. The League was fortunate enough to havemembers of the UBIT Steering Committee speak toour credit unions on this developing topic. The UBITSteering Committee is comprised of representativesfrom CUNA Mutual Group, CUNA & Affiliates,AACUL, and NASCUS, speak to Florida’s creditunions. Larry Blanchard, SVP CUNA Mutual, EricRichard, EVP and General Counsel of CUNA, andBill Karls, VP and Corporate Controller, CUNAMutual led what turned into a vibrant discussion onhow to account for UBIT and strategies for minimizingthe tax.The League has posted the materials from thisconference on the Compliance Share Site on FCUL’swebsite. Of particular interest, we would encouragecredit unions to take a look at the UBIT AccountingTool which will provide you with strategies onaccounting for and minimizing any UBIT tax thatyour credit union may incur.As a reminder, the calculation of the UBITtax is on the net unrelated business income. Thisis determined by deducting expenses “directlyconnected” with engaging in an unrelated businessactivity from the gross income of the activity. Thisdeduction can be taken if the expense has a proximateand primary relationship to the unrelated incomeactivity. The accounting tool and the materials willguide you through steps for making the allocations forcalculating the expenses to reduce any UBIT tax youmay have. As always, we suggest you seek the advice ofyour own tax professional for determining any taxes.FCUL will continue to monitor the litigation andany other activity by the IRS on this issue. We will alsokeep you apprised of any significant developments onthis developing saga.Andy Price8 FLORIDA CREDIT UNION NEWS