The fight to protect the credit union tax exemption may not be over yet.
Banking trade organizations on Monday urged the House Ways & Means Committee to eliminate the tax-exempt status for credit unions as part of tax reform.
“The evidence clearly shows that the tax exemption is outdated, subsidizes wealthy credit union members, and distorts economic competition among financial firms offering exactly the same loans and deposit services. Credit unions were never intended to be tax-free banks, but that is what they have become,” said a letter to Ways & Means Chairman David Camp (R-Mich.), written by American Bankers Association President/CEO Frank Keating and Independent Community Bankers of America President/CEO Camden R. Fine.
The public does not differentiate credit unions from banks, the letter also said, and tax policy should not be used to favor one over the other.
“There's absolutely nothing new here, which makes you wonder why the bank lobby is trotting this out again,” said John McKechnie, a partner with the Washington-based strategy and lobby firm Total Spectrum. “Maybe banks are angry with their trades for coming up empty on credit unions, and letting a new bank tax slip into the Camp draft?”
|Also of interest:
Larson on Credit Unions and Tax Reform: Video CUTs
Trades Confirm No New Credit Union Taxes
The tax reform draft released by the committee last month did not include credit unions, but did include some new bank taxes.
NAFCU responded to the letter from the ABA and ICBA.
“If credit unions have such an extraordinary advantage, why aren't banks lining up to convert to credit unions? What the bankers forgot to mention in their attack is that nearly one-third of banks are Subchapter S corporations and pay no corporate income tax,” NAFCU President/CEO Dan Berger said in a letter to Camp on Tuesday.
“Yes, they pay other taxes, but so do credit unions and their over 97 million member-owners who pay personal income taxes on the dividends they get from their credit union,” he added.
Berger said credit unions pay payroll taxes as well as state and local taxes.
“Next time a banker complains to you about credit unions, we would urge you to ask them if they have looked at converting to one,” he wrote.
NAFCU has estimated that ending the tax-exempt status would result in the loss of 150,000 jobs a year, shrinking GDP and less revenue for the federal government.
“The cumulative benefit credit unions provide the greater economy totals over $17 billion a year according to an independent study released by NAFCU just last month,” Berger wrote. “As the study also shows, altering the tax status of credit unions would have a devastating impact not only on credit union members across the country, but also on consumers and small businesses in general.”
Ways & Means committee member Rep. John Larson (D-Conn.) told CU Times the tax exemption should stay.
CUNA also responded to the letter.
“We're informing our supporters and advocates about the bankers' letter through social media so they can contact their lawmakers,” said Pat Keefe, CUNA's senior vice president of communications.
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