WASHINGTON-The most recent attack on credit unions' tax exemption has caught the eye of consumer groups, mainstream media, and others outside of the credit union-bank battle. One of the highest ranking officials to recently take note of the credit union taxation challenge by the bankers was Senate Banking Committee Chairman Richard Shelby (R-Ala.). During a session with reporters, Dow Jones Newswires quoted Shelby as stating, “I'm not for taxes. I'm not for taxing credit unions. You start taxing credit unions, you know who's going to pay the taxes-the members.” CUNA Vice President of Legislative Affairs and Senior Legislative Counsel Gary Kohn commented, “That is a very, very important statement from our perspective. It really marks the first time that I know of that Chairman Shelby has publicly stated that position and he's obviously a very powerful player in the Senate.” “We're pleased to see comments from the Senate Banking Committee Chairman in that regard,” NAFCU Director of Legislative and Political Affairs Brad Thaler echoed. CUNA quickly penned a letter to the senator, thanking him for his comments in favor of maintaining credit unions' tax-exempt status signed by President and CEO Dan Mica. “Above all, Chairman Shelby, please accept my sincere thanks for these comments about the tax status of credit unions. Coming from you, these words will have a very happy effect on the people who make up the credit union movement, particularly those in your home state of Alabama,” Mica wrote. He added, “And, as you have wisely commented, a tax on credit unions is a tax on the members – 84 million consumers nationwide.” Mica said he looked forward to working with Shelby in the future on issues affecting credit unions. The Dow Jones story also noted Federal Deposit Insurance Corp. Chairman Don Powell's recent remarks and letter exchanged with CUNA on his position in favor of taxing credit unions. CUNA has been exchanging letters with the FDIC chairman since he began publicly stating that credit unions should be taxed. These comments have caught the attention of some major consumer advocacy groups who not only disagreed with Powell's position but also his place in making comments on such an issue. Consumer Federation of America Executive Director Stephen Brobeck and Consumers Union Regulatory Counsel Janell Duncan recently sent a joint letter to Chairman Powell expressing “deep concern and disappointment” over his recent comments in favor of credit union taxation. “The Consumer Federation of America and Consumers Union strongly believe the current federal tax exemption for all credit unions, regardless of size, should be preserved,” the groups' leaders wrote. “The taxation that you have called for would not only significantly weaken the capital position of credit unions, as recently noted by National Credit Union Administration Chairman Dennis Dollar, it would severely limit their ability to serve their members in the future,” the letter read. It also noted that CFA revised its existing policy to clarify that it supports preserving the current state tax exemptions in light of increased banker attacks. The letter continued, “Chairman Powell, we are puzzled as to why you would take a public position on an issue that seems unrelated to your role as a federal regulator and insurer of the U.S. banking system and would in fact work to the detriment of on important component of that system. Such an action is unprecedented for someone in your position. Moreover, it runs counter to the policy of the Bush Administration reaffirmed by Treasury Secretary John Snow just weeks prior to your statements.” The letter concluded by asking the chairman to refrain from commenting further on credit union taxation. CUNA's Mica issued a statement thanking CFA and Consumers Union for their public support of credit unions' tax-exemption. “Consumers get it: Credit unions' tax status lies in their structure as not-for-profit and cooperatively owned financial institutions, which are democratically controlled and provide affordable, quality financial services. The banks that Mr. Powell supervises may say that a `level playing field' is at issue, but we continue to maintain that a level playing field makes sense only if the game is between players of the same species. It is quite clear that credit unions and banks are different-and that the playing field is already level enough, although perhaps tilted toward the banks.” In related news, America's Community Bankers recently sent a letter applauding House Ways and Means Committee Chairman Bill Thomas' (R-Calif.) recent remarks that he is interested in studying some non-profits'-such as credit unions'-societal value versus their tax-exempt status. “Our economy is built on free and fair competition,” ACB Executive Vice President and Managing Director of Government Relations Robert Davis wrote. “However, the free market is being disrupted by tax subsidies provided to large, complex credit unions that compete head-to-head with tax-paying community banks.” ACB cited a Treasury Department study showing that “the credit union tax exemption will cost taxpayers and the U.S. Treasury $1.36 billion in the coming fiscal year and $7.88 billion cumulatively through 2009.” The letter also stated that credit unions are more diversified and mature than the mutual savings associations that lost their tax-exemption more than 50 years ago. “Thank you for acknowledging that Congress did not intend tax exemptions to be used to establish parallel industries that compete directly with commercial businesses, offering the same products in the same markets,” Davis concluded. “We believe that diversified credit unions offering the same products and services as community banks should pay taxes. Please hold formal hearings to examine this problem further.” In response to ACB's letter, CUNA's Kohn stated, “We're not aware of any response to that but as we've been telling you for some time now our efforts appear to be paying some dividends. We're hopeful that there will not be any such hearing this year, so the fight goes on. It appears that a lot of the efforts being made by the bankers actually are resulting in very positive statements in support of credit unions.” [email protected]