UBIT… You Bet!
By: Dennis Gardiner, Partner | email
You are all painfully aware of the on-going issue with the IRS and unrelated business income. Based on the IRS issued Technical Advice Memoranda (TAMs); a recent discussion with Larry Blanchard of CUNA Mutual Group; and the absence of any supportable positions to the contrary, we are encouraging our clients to make the appropriate tax filings (990-T) to comply with Internal Revenue Code Sections 511-513.
If the trade associations are successful in challenging the IRS decisions (which as we understand they will be in court in the first quarter of 2008), and your credit union has paid tax that would not have been necessary due to a successful outcome of this challenge, then amended returns will be able to be filed to recover any tax paid.
If your credit union generated more than $1,000 in unrelated business income, you will be required to file form 990-T and pay the appropriate tax. We will be working with a couple of our credit union clients over the next few weeks to determine their potential tax liability. In the course of working with these clients, we will be developing our approach to arriving at the net unrelated business income for these credit unions. Ultimately our goal is to assist in minimizing tax liability, documenting expense allocation and ensuring proper income is included in arriving at the net unrelated business income.
We encourage you to contact us to discuss this issue further.