The banking industry's top trade group is renewing its push to end a tax break for credit unions. The American Bankers Association last week unveiled print and radio ads that call on Congress to repeal a Depression-era law that exempts credit unions from federal income tax because of their cooperative structure. The exemption amounts to "indefensible and outdated special treatment," according to one of the spots, which coincided with a conference in Washington convened by the Credit Union National Association, a trade group.
As part of their meeting, members of CUNA were expected to visit Capitol Hill to urge legislators to lift limits on business lending by credit unions. Currently, a credit union's loans to businesses cannot exceed 12.25% of its assets, but CUNA backs a bill reintroduced recently by Rep. Ed Royce, R-Calif., and Carolyn McCarthy, D-N.Y., that would raise the lending cap to 27.5%. Similar measures have been introduced in recent years in both the House and Senate but have yet to advance despite attracting bipartisan support.
The ABA has consistently sought to block the change. According to the group, credit unions are pushing to loosen restrictions while enjoying a tax break that community banks cannot claim. "Credit unions were never intended to be untaxed banks, yet that is what they have become," Frank Keating, the ABA's chief executive, wrote last week in a letter to congressional leaders.
"Our latest effort with the ads and with the letters is to really share with this new Congress that the credit union industry, as represented by the industry, is not the industry they know; they are by all accounts tax-exempt banks that compete every day with banks," James Ballentine, the ABA's chief lobbyist, told American Banker.
The tax break especially benefits credit unions with more than $500 million in assets, the ABA charged in an email Wednesday to members of the House and Senate.
For its part, CUNA maintains the cooperative ownership of credit unions continues to warrant their tax treatment. "The ABA may be running a radio ad, but we have more than 4,200 real people in Washington …from around the country meeting personally with their members of Congress to explain that a tax on not-for-profit, cooperatively owned credit unions is a tax on their 96 million member-owners," CUNA spokesman Mark Wolff said in an email.
The National Association of Federal Credit Unions sent legislators a study the group says shows the tax exemption for credit unions delivers a $10 billion benefit to consumers annually. "Eliminating the credit union tax exemption would result in the loss, on average, of over 150,000 jobs a year over the next decade, a shrinking of the [gross domestic product] and a net loss of revenue to the federal government," Brad Thaler, the group’s top lobbyist, wrote in his missive.
Though the White House has not taken a position on the latest effort to lift the cap, the Obama administration has previously voiced support for authorizing credit unions to increase their lending to small businesses in cases where credit unions bump up against the current limit and have policies in place to ensure their safety and soundness.