The powerful chairman of the tax-writing Senate Finance Committee is questioning whether credit unions still deserve their tax-exempt status.
"I am concerned that the credit union industry is evolving in ways that take many credit unions further from their original tax-exempt status," Senate Finance Chairman Orrin Hatch (R-Utah), said in a letter Jan. 31 to NCUA board Chairman J. Mark McWatters.
Hatch said the NCUA has relaxed field-of-membership constraints, opened the door to the use of alternative capital and lifted limits on business lending.
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"While these may be worthwhile pursuits, they should give us pause and cause a reflection on the core mission of credit unions and their tax-exempt status," Hatch wrote.
This new threat to the credit union tax status comes at a time when credit union trade groups had declared victory since the tax overhaul bill that was enacted last year preserved the tax-exempt status. However, Congress is likely to consider a technical corrections bill to the tax overhaul legislation, which could open the door to a renewed review of the credit union tax status.
Hatch is not subject to the usual political pressure that comes from raising such a divisive issue, since he is retiring at the end of the year. In the letter, Hatch said that the federal credit union common bond requirements have been watered down through "regulatory interpretations and a dearth of enforcement in recent decades."
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