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Government drops UBIT appeal

The Department of Justice announced Tuesday that it has decided to withdraw its appeal of the Bellco Credit Union UBIT case. Last November, a district court ruled that the insurance and investment products Bellco Credit Union, based in Denver, sold its members, including credit life and disability insurance and some other products, stocks, bonds, mutual funds and annuities, were “substantially related” to Bellco’s tax exempt purpose that therefore income from those products was exempt from unrelated business income tax (UBIT). Income from sales of accidental death and dismemberment insurance marketed by a third party via Bellco's mailing lists were held to be exempt royalty income.

The district court ruling was a victory for credit unions and a loss for the IRS. In August, the Justice Department indicated it planned to appeal the district court's decision. However, the Justice Department decided not to pursue the appeal and has withdrew the notice of appeal it had filed with the U.S. Court of Appeals for the 10th Circuit.

CUNA and the other members of the UBIT Steering Committee (AACUL, CUNA Mutual and NASCUS) will be working on a strategy that they hope will put the UBIT issue to rest with the IRS and others for a long time to come.

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