WASHINGTON–America’s Credit Unions has filed a comment letter with the IRS related to its proposed regulations implementing the new vehicle loan interest deduction enacted under the One Big Beautiful Bill Act in which it says the proposal is not firing on all cylinders.
Eastman Credit Union in Tennessee has also sent a comment letter in which it flags its own concerns.
In its letter, America’s Credit Unions said it is concerned over:
- Disproportionate implementation costs. “The proposed rule would require significant one-time investments in systems, vendor integrations, and staff training to support a tax benefit that applies for only a limited three-year period.”
- Major system rewrites required. “Credit unions would need to substantially modify loan origination, servicing, and reporting systems to capture and track tax-specific data that is not part of existing auto lending practices.”
- Eligibility determinations based on unavailable information. “Several requirements would require lenders to make determinations using information they often do not have and cannot reasonably obtain, particularly for indirect loans and refinances from other institutions.”
- Operational risk in common real-world transactions. The letter highlights “challenges related to original use standards, personal use determinations, refinancing transactions, negative equity in trade-ins, and rolled-in amounts, all of which could lead to inconsistent reporting outcomes for similarly situated borrowers.”
- Short implementation timeline with elevated compliance risk. “Even with transition relief, the novelty and complexity of the reporting regime increases the risk of unintentional errors during initial filing years.”
Recalibration Urged
The ACU letter urges the IRS to recalibrate the final rule by adopting clearer lines of responsibility, borrower-based determinations where appropriate, and administrable safe harbors that reflect how auto lending operates in practice. Without those changes, the proposal risks creating confusion for borrowers and imposing compliance obligations that are not feasible to implement consistently across the credit union system.
Eastman CU Say Proposal Full of Potholes
Separately, in Kingsport, Tenn., Eastman Credit Union is urging the Internal Revenue Service to revise proposed regulations governing a new tax deduction for passenger vehicle loan interest, arguing the rules would force lenders to make determinations they cannot reliably verify.
In a comment letter dated Jan. 26 and signed by CEO Kelly Price, the $9.9-billion credit union said the IRS proposal would require lenders to identify whether loans qualify as “specified passenger vehicle loans” and to report interest only on those loans — a task Eastman CU said is operationally unworkable.
The comment letter was first reported by TaxNotes.com.
Eastman, which serves more than 300,000 members in Tennessee, Texas and Virginia, said lenders typically do not have access to key information needed to determine eligibility. That includes whether a vehicle was finally assembled in the United States, whether original use begins with the borrower, whether the vehicle is intended for personal use and whether it meets certain classification and emissions criteria.
‘Known Only to Manufacturer’
“Many of these factors are known only to the manufacturer, dealer, titling authority or taxpayer,” the letter states, adding that requiring lenders to make such judgments would lead to costly systems changes, inconsistent determinations across institutions and a higher risk of errors. Those errors, Eastman warned, could result in borrowers being denied tax documentation needed to claim the deduction.
Two Alternatives Proposed
Instead, Eastman CU’s comment letter proposed two alternatives. One would allow lenders to report interest for all vehicle loans, leaving it to taxpayers — who possess or can obtain the relevant information — to determine deductibility when filing their returns. Another option would permit lenders to meet reporting requirements by continuing to provide annual interest information through periodic statements, an approach the IRS has allowed for the 2025 tax year, the credit union suggested.
Eastman said both alternatives would preserve the IRS’s ability to enforce eligibility rules while aligning compliance requirements with the data lenders can actually verify.
The 356,000-member ECU said it supports efforts to expand access to tax benefits for borrowers but warned that the current proposal would impose unnecessary burdens on thousands of credit unions.
