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U.S. Government Appeals Bellco’s UBIT Case   (Monitor: August 23, 2010)

Bellco CU of Greenwood Village, Colorado will again face a judge in its case to exempt income from sales of stocks, bonds, mutual funds and annuities from the unrelated business income tax (UBIT). The U.S. government has decided to challenge the federal district court decision, sending it to the U.S. Court of Appeals for the Tenth Circuit, potentially resulting in an even larger victory for the credit union movement.

In the previous ruling, in November 2009, Judge Christine M. Arguello found that Bellco CU’s investment products were “substantially related” to the credit unions tax-exempt purpose, making the related income exempt from UBIT. She added:

“In the banking and credit union context, the concept of thrift is tied to sound financial management… Credit insurance does just that. It permits a borrower to guard against certain difficult circumstances and to know that, if the unfortunate event of death or a serious disability occurs, the borrower's family and/or assets would be protected. For a relatively marginal payment, the borrower buys peace of mind."

The November ruling was in addition to an April 2010 decision excluding income from credit life and disability insurance from similar UBIT taxation.

According to CUNA General Counsel Eric Richard, "We may get a powerful favorable precedent out of this at the Court of Appeals level. Obviously, we will be fighting hard."

Credit unions with questions on the effect of the UBIT rulings should contact MCUL Director of Compliance and General Counsel Veronica Madsen at

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