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IRS Guidance for Automatic Revocations of Tax Exempt Status

 

On June 8, the IRS released guidance for federal and state credit unions that have received letters claiming to revoke their tax-exempt status. The guidance appears to have been released in response to the Credit Union National Association’s (CUNA) and credit unions’ concerns raised with the IRS. The guidance addresses three specific scenarios where credit unions may have erroneously received revocation letters:

  1. A federal credit union that was previously a state credit union appears on the IRS revocation list, even though federal credit unions are not required to file an annual return;
  2. A state credit union appears on the revocation list; and
  3. A credit union received one or two letters from the IRS stating that its parent organization is no longer exempt.

However, the guidance fails to address an additional scenario that appears to be happening fairly frequently: federal credit unions have been receiving revocation letters, or have been placed on the IRS revocation list, because they file a Form 990-T, which is required to claim the health insurance premium tax credit. The filing of a Form 990-T apparently triggers a search by the IRS computer for past Form 990 filings. If no Form 990 filings are found (which is common as federal credit unions are not required to file an annual Form 990), a computer-generated letter is sent to the credit union. 

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