Credit Unions (And Bankers!) Learn to Repeat After Chairman Thomas: Transparency, Accountability, and Verifiability

WASHINGTON-As one Virginia congressman put it, credit unions came closer than ever to taxation this year. In the most public of arenas to date, the tax-exempt status of credit unions was called into question during a hearing slated by House Ways and Means Committee Chairman Bill Thomas (R-Calif.). It was clear that most members of the panel were not looking to repeal credit unions’ tax-exemption. But, what many were looking for was evidence of how credit unions are fulfilling their mission to serve people of modest means in order to earn their tax-exempt status. The credit union and banking representatives at the hearing came away repeating Thomas’ exact words: “transparency, accountability, and verifiability.” Though he said he was not ready to impose a federal income tax on credit unions, he questioned why NCUA would resist collecting CEO salary information and encouraged some type of reporting to demonstrate service to people of modest means. Though NCUA Chairman JoAnn Johnson assured the committee chairman that the taxpayers were “getting their money’s worth,” Thomas said her assurances were not good enough; some type of documentation is necessary. Johnson later said, “While we know credit unions are serving folks from all walks of life and are extending service to those in underserved areas, I believe credit unions need to do a better job in telling their story. Credit unions have a great story to tell, they just need to make sure their message is being heard.” She has since asked NCUA’s task force, charged with figuring out how to document credit unions’ work without overly burdening them, to look into the committee’s concerns. Johnson said she wants the taskforce to think outside the box in analyzing 5300 Call Report data to see what might be gleaned from that reporting mechanism already in place. NCUA plans to announce the results some time next year. Though credit unions were able to justify their tax-exemption to Congress in the H.R. 1151 battle and avoid documentation attempts by former NCUA Chairmen Norm D’Amours and Yolanda Wheat, this time around even the major credit union trade association chiefs are wondering what may be in the hopper for credit unions on the documentation front. D’Amours made yet another appearance on the credit union scene at the hearing. Though he said he did not advocate taxing credit unions, he did strongly support-as he always has-CRA-like requirements for them. Of course the banking community jumped on the documentation issue as well. America’s Community Bankers CEO Diane Casey-Landry stated, “I think CRA, especially for the larger credit unions, is really inevitable.” In follow up comments to the committee, ACB proposed two pieces of legislation, one of which would require credit unions to obtain 75% of their deposits from low-income people to maintain their tax-exemption and another to disclose credit union CEOs’ salaries by requiring credit unions to file form 990s with the IRS. The credit union system seems uneasy with disclosing credit union chiefs’ pay. At the hearing, Johnson pointed out that the CEO’s pay is set by the volunteer board of directors elected from the membership and cited a study that showed credit union CEOs salary to be 57% of their banking counterparts. American Bankers Association Senior Economist Keith Leggett said that the hearing made clear that the tax-exemption is a privilege but that his organization still has more educating to do with the credit union-friendly members of the committee. ABA, ACB and the Independent Community Bankers of America were invited to testify at the hearing and made the usual comments about credit unions’ size and breadth of services, including business lending, as part of the reason why credit unions no longer merit their tax-exempt status. Though both sides claimed partial victories following the Ways and Means Committee hearing, in comparison with “a last minute tax package,” CUNA President and CEO Dan Mica considered the hearing “a total victory.” [email protected]