Host of Lawmakers Speak Out in Favor of Credit Union Tax Exemption

WASHINGTON-A total of 23 members of the House of Representatives recently expressed their strong support for credit unions’ tax-exempt status. Twenty-one California Democrats wrote a letter June 24 to Federal Deposit Insurance Corporation Chairman Don Powell asking him to revise his public remarks supporting the taxation of credit unions. Powell, a former community banker himself, stated publicly on more than one occasion this spring that he favored taxing credit unions. The lawmakers’ letter emphasized that credit unions are exempt from paying federal taxes because of their non-profit structure, democratic governing, and member ownership and control. “The credit union mission of “people helping people” is evidenced in credit unions across America that put the member, or consumer, first-as opposed to banks, whose primary obligation is to the stockholder. In a credit union, one member equals one vote, and earnings are returned to the members (original emphasis),” the letter read. Further, the Democrats reminded Powell that credit unions do pay other taxes, including payroll, sales, and property taxes. They also noted the size difference between the two industries. “It is difficult to imagine that banks, which have posted record profits of $120.6 billion (as reported by the FDIC for 2003) and have combined assets of $9.1 trillion (original emphasis), are threatened by the $610 billion credit union industry,” the Democrats wrote. “Finally, as supporters of the current federal tax exemption for credit unions, we are also concerned about the impact taxation might have on consumers and the future safety and soundness of credit unions.” The letter was signed by California Democratic Representatives Bob Filner, Brad Sherman, Xavier Becerra, Loretta Sanchez, Mike Thompson, Joe Baca, Tom Lantos, Robert T. Matsui, Grace Napolitano, Barbara Lee, Hilda L. Solis, Linda T. Sanchez, Ellen O. Tauscher, Susan A. Davis, Zoe Lofgren, Anna Eshoo, Adam Schiff, Lynn Woolsey, Sam Farr, Michael M. Honda, and George Miller. Matsui and Becerra are members of the House Ways and Means Committee with jurisdiction over taxes. Matsui and Filner met with the California Credit Union League in Washington, D.C. just prior to the letter. “The California Credit Union League thanks Congressman Filner and members of our congressional delegation for standing up for credit unions and the 10 million Californians we serve,” league President David L. Chatfield said. “Too often bankers have falsely accused credit unions of having a `cheerleader regulator.’ With Chairman Powell’s comments, the shoe is truly on the other foot. Chairman Powell’s comments were not only inappropriate, they were misinformed. California’s credit unions are pleased that so many of our representatives understand that, and recognize that a tax on credit unions hurts working Americans and helps no one but banks.” Separately, Congressman Joseph Knollenberg (R-Mich.) recently wrote T&C Federal Credit Union supporting their position on the tax-exempt status of credit unions. “As we look at our economic growth, it is clear credit unions have played an integral role,” the congressman wrote. “Their presence in our communities have provided needed financial opportunities to small businesses, families, and workers. Their continued work is vital to the future of our economy.” He continued, “Unlike other financial institutions, credit unions are not-for-profit, financial cooperatives owned by their members. Boards of directors serve as unpaid volunteers, elected by members. In addition, credit unions return all excess income to members through higher deposit rates, lower loan rates and lower fees.” “Clearly, credit unions’ tax exempt status should not be repealed or altered. The result of removing tax exempt status would be a tax increase on credit unions and their members. During a time of pro-growth economic policies, it is counterproductive to institute a new tax on credit unions.” Knollenberg’s letter concluded, “Be assured I will continue to oppose any effort that removes credit unions’ tax exempt status.” In addition, Congressman Leonard Boswell (D-Iowa) also recently came out in favor of credit unions’ tax exemption. The lawmakers sent a statement to the Iowa Credit Union League stating, “Historically, Congress has viewed credit unions differently than banks because credit unions are non-profit, cooperatively owned institutions. While the financial services sector has shown growth, credit unions have experienced tremendous growth over the past 50 years. Their expansion has resulted in an increase in the number of people joining and electing to do business with their credit union. Over these 50 years their non-profit, cooperative structure has remained true.” Boswell continued, “Therefore, a tax increase on credit unions would negatively impact thousands of my constituents. This could further dampen the economy at a time when it is sluggish at best. A tax increase would put a drag on Iowa’s economy at a time when families continue to struggle to make ends meet and is something I would not support.” [email protected]