New Round of IRS Tax Exemption Automatic Revocation Letters May be Starting

Like zombies from a B-movie, just when you thought they were gone for good… they’re back.

That’s right: Credit unions throughout the Northwest have been opening their mailboxes to find letters from the Internal Revenue Service (IRS) informing them that they are on the list for automatic tax exemption revocation.

The good news is that credit unions still have nothing to fear, as the letters have again been issued in error. The revocation letters are generated due to the Pension Protection Act of 2006, which requires the IRS to automatically revoke the tax-exempt status of any organization that fails to file a required annual information return (990) for three consecutive years.

Federal credit unions under the supervision of the National Credit Union Administration (NCUA) are tax exempt under section 501(c)(1) of the IRS rules, and are therefore not required to file an annual information return. Records at the IRS may inadvertently identify a federal credit union as having a state charter, however, and because state-chartered credit unions are required to file the annual information return, that misclassification triggers the letters currently being sent.

The IRS has established a webpage with information for federal and state credit unions regarding automatic revocation of exemption. Federal credit unions may need to prepare a request signed by an officer of the credit union proving the classification of the credit union and:

  • The organization’s name;
  • A printout from the NCUA website showing that the organization is under NCUA supervision;
  • Theorganization’s address;
  • The organization’s Employer Identification Number (EIN); and
  • The name and title of the officer signing the request.

Fax the request to the IRS at 513.263.4330, or mail it to:

IRS –TE/GE
Attn: Correspondence Unit
P.O. Box 2508
Cincinnati, OH 45201

 

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance, Federal, NCUA.