WASHINGTON — Members of the credit union community, while standing up for the tax-exemption, do not feel that danger is imminent even after the Treasury Department–which includes the IRS–has made its third mark against the credit union tax-exemption this year.

CUNA fiercely responded to a June 28 letter from Acting IRS Commissioner Kevin Brown to Senate Finance Committee Chairman Spencer Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa) that the line between tax-exempt and commercial entities is blurring, listing credit unions as key offenders. Credit unions found a strong supporter on their side: none other than Chairman Baucus. "I am a big supporter of credit unions," he said. "Credit unions play a vital role in helping Montanans, providing communities and underserved populations with top-notch banking services. I will fight any attempt to take away credit unions' tax-exempt status."

Under compliance issues, the IRS letter stated, "The movement of commercial enterprise into the charitable sector remains an issue. Various factors encourage this movement, including the absence of bright line standards in the tax-exempt area, the promise of exemption from consumer protection and similar regulatory statutes enjoyed by charities, and the economic benefit the tax exemption itself conveys. The line between commercial and charitable operations may be further blurred in certain cases where market forces, industry practice, or the non-tax regulatory environment has changed over time. For example, as we have mentioned previously, many tax-exempt hospitals are difficult to distinguish meaningfully from for-profit hospitals; many tax-exempt credit unions may be hard to distinguish from for-profit banks; and many tax-exempt and for-profit nursing homes may meet the same standards and be virtually indistinguishable." It also lists credit counseling agencies and down payment assistance organizations.