September 9, 1998
Terry R. West, President/CEO
Jax Navy Federal Credit Union
P.O. Box 45085
Jacksonville, Florida 32232
Dear Mr. West:
You have asked several questions concerning
potential tax liability of federal credit union (FCU) members
who funded Roth IRA or Education IRA accounts with FCUs between
January 1, 1998 and March 23, 1998. You raise these questions
because the Internal Revenue Code (IRC) provisions that authorize
these accounts went into effect on January 1, 1998, but the technical
amendment to NCUA regulations identifying them as permissible
did not issue until March 24, 1998. 63 FR 14025, March 24, 1998.
Specifically, you have asked whether the Internal Revenue Service
(IRS) could determine that tax liability exists for members who
funded these accounts during that time period. You have also
asked whether NCUA can "preempt" any such IRS determination
by adopting a final rule with a retroactive effective date of
January 1, 1998.
We cannot state how the IRS will treat a particular
activity, however, we believe that the IRS would likely share
our view that the IRC has provided the statutory authority for
FCUs to offer the accounts since January 1, 1998, and NCUA's interim
rule has merely conformed our regulations to that statute. This
matter does not involve a question of preemption which generally
pertains to circumstances where there is a conflict or inconsistency
between state and federal law.
We appreciate your concerns regarding this
issue and anticipate that the NCUA Board will address it at the
meeting scheduled for September 23, 1998.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/FSK:bhs
SSIC 3500
98-0537