System Leaders Addressing IRS' Erroneous Tax Exemption Correspondence to Credit Unions

Sept. 19, 2011 - NASCUS has learned that state regulators and credit unions have received erroneous correspondence from the Internal Revenue Service (IRS) regarding the revocation of some credit unions' tax exemption. This is paperwork and recordkeeping mistake by the IRS, and not a change in the law. The credit unions' tax exemptions are not threatened.

NASCUS understands that most of the letters are directed to state-chartered credit unions whose IRS Form 990s were at one time filed by state regulators in group returns. The practice of group filings has been discontinued by state regulators and the credit unions in those groups have been filing their Form 990s individually. However, the IRS claims that the credit unions in these groups have failed to file their Form 990s for three or more years, and therefore requires the automatic revocation of their tax exemptions. Inexplicably, some federal credit unions have also received letters; however they are instrumentalities of the federal government and thereby are not required to file with the IRS.

NASCUS, as a member of the UBIT Steering Committee, is working with system leaders to reconcile this problem with the IRS. "In some cases, it has been nearly 20 years since a state regulator provided a group filing with the IRS, and those credit unions have filed individually for years," said NASCUS President and CEO Mary Martha Fortney. "This behavior by the IRS only further reinforces our belief that the IRS does not have a clear understanding of the credit union business. NASCUS and the UBIT Steering Committee will continue to encourage the IRS to adopt a national guidance regarding the tax treatment of credit unions," said NASCUS President and CEO Mary Martha Fortney.

If you received this correspondence, respond to the IRS asserting your tax exemption and provide copies of the last three years of Form 990 filings. This communication should be sent to:
IRS E/O Accounts
Mail Stop 6552
Ogden, UT 84201

NASCUS will provide updates on this issue here on its website at www.nascus.org.