Hands Off CU Tax Exemption, Wyden Says: Onsite at NAFCU Congressional Caucus

As lawmakers presented to the NAFCU Congressional Caucus their lists of financial services legislation they want enacted, one key senator made it clear that there is one measure he will fight hard to block.

Sen. Ron Wyden (D-Ore.), the ranking Democrat on the tax-writing Finance Committee, said lawmakers had better not try to eliminate the credit union tax exemption.

“Anybody who wants to change that is going to have to run through me,” Wyden declared. “Credit unions are going to win that fight.”

A second lawmaker agreed. “We cannot change that,” Sen. Gary Peters (D-Mich.) said.

Former Senate Finance Chairman Orrin Hatch (R-Utah) last year questioned whether the tax exemption was outdated, but Hatch has retired.

Many members of Congress came to the NAFCU conference outlining their priorities for credit union-related legislation, including:

Providing a safe harbor for financial institutions providing services to marijuana-related companies. Rep. Ed Perlmutter (D-Colo.), one of the main cosponsors of the bill, said he believes the measure will pass the House in the next several weeks. 

Perlmutter also said he believes there are “real positive signs” that the Senate may be willing to pass the bill.

Rep. Blaine Luetkemeyer (R-Mo.), the ranking Republican on the House Consumer Protection and Financial Institutions Subcommittee, said he remains concerned that if Congress passes the banking bill, but marijuana remains a controlled substance, there would be a conflict between federal laws.

Luetkemeyer said that under one compromise that could lead to passage of the banking bill, provisions that would outlaw efforts like the controversial “Operation Choke Point” would be added to the bill. That project was intended to hold financial institutions accountable for processing transactions they knew were fraudulent. Critics have said that the program empowered financial institutions to decline to provide services for controversial businesses, such as gun dealers and payday lenders.

House Financial Services Chairwoman Maxine Waters (D-Calif.) said the banking legislation should not be the final word on marijuana, adding that she believes it must be decriminalized.

Increasing the Member Business Loan cap. Such a boost would allow credit unions to increase their lending to small business, House Small Business Committee Chairwoman Rep. Nydia Velázquez (D-N.Y.) told those attending the NAFCU conference. Peters agreed, saying, “We need to raise that spending cap.”

Requiring businesses to disclose their beneficial owners at the time a company is formed. Rep. Carolyn Maloney (D-N.Y.) said that currently financial institutions must collect that information from companies.

“This burden should not be on the companies,” she said. “It should be on the companies themselves.”

Adjusting implementation of the controversial Current Expected Credit Losses standard, under which institutions will have to recognize the expected lifetime losses at the time a loan or financial instrument is recorded. 

Luetkemeyer said the standard is “nonsensical,” adding that regulators need to narrow it or eliminate it.

Rep. Andy Barr (R-K.Y.) said he is concerned that any delay would not be effective if policymakers do not use the time to reexamine the standard. “We don’t want that exercise to be just kicking the can down the road,” he added.

Banking trade groups have been lobbying hard for Congress to eliminate the credit union tax exemption. Those efforts include a secretive website, explorecreditunions.com, that provides arguments opposing the tax exemption.

Ownership of that website had not been disclosed for more than a year. CU Times reported that last week, the website’s registration stated that the American Bankers Association owned the site.

The website was taken down shortly after the CU Times asked the ABA about the site.

This week, the website reappeared; the ABA’s ownership is now disclosed at the bottom of the homepage.