Friday, December 16, 2016

Leasing of Excess Space by FCUs Should Be Subject to UBIT

Federal credit unions (FCUs) are leasing their excess space; but the income from such leasing arrangements is not subject to unrelated business income taxes (UBIT).

Recent examples of FCUs announcing plans to lease excess space include:
  • Apple Federal Credit Union with $2.1 billion in assets is building a six-story, 150,000 square-foot headquarters building in Fairfax, Virginia. Apple FCU plans to occupy three floors and will lease the remaining office space.
  • Pentagon Federal Credit Union has paid $164.1 million for a new 11-story, 307,634 square-foot headquarters building in Tysons, Virginia. The credit union plans to initially occupy about half of the office building. Pentagon FCU will lease about 150,000 square feet to LMI.

This trend should continue as the National Credit Union Administration yesterday finalized a rule eliminating the requirement that FCUs plan for, and eventually achieve, full occupancy of acquired premises. The final rule modifies the definition of “partially occupy” to mean occupation and use, on a full-time basis, of at least 50 percent of a premises by an FCU or by a combination of the FCU and a credit union service organization in which the FCU has a controlling interest.

This would allow an FCU to venture into real estate activities, which are outside the mission and purpose of an FCU's tax exemption.

Therefore, Congress should repeal Section 1768 of the Federal Credit Union Act. This would permit the income from unrelated activities such as the leasing of excess space be subject to UBIT.

No comments:

Post a Comment


The content is provided for educational purposes only, with the understanding that neither the authors, contributors, nor the publishers of this site are engaged in rendering legal, accounting or other expert or professional services. If legal or other expert assistance is required, the services of a competent professional should be sought.

Comments appearing in response to articles appearing on this site do not necessarily reflect the views of the ABA. ABA makes no representations regarding the truth or accuracy of commentary or opinions that may be posted in response to the articles that appear on this website.

The inclusion herein of any link to a website, either in the text of an article or in a comment, does not denote any approval, sponsorship, or endorsement by the ABA, and ABA is not responsible for the content or opinions expressed on those linked websites or related commentary. This content is not licensed to third parties sites and is not affiliated with any third party site. Any reference to the author or this content on any third party site on the Internet is not authorized by the ABA.

It is the policy of the American Bankers Association to comply fully with all antitrust laws. Certain discussions should be considered off-limits, including those that contain competitively sensitive data such as price and cost information, or statements that could be construed as reflecting an attempt or desire to control or influence a particular market or markets. Future pricing or other prospective competitive information should never be shared.