Credit unions breathed a sigh of relief when the tax reform bill didn't make any mention of changing the movement's tax-exempt status, but the recent letter from Utah Republican Sen. Orrin Hatch to the National Credit Union Administration questioning that very status quickly put CU advocates back on full alert, particularly as Hatch chairs the Senate Finance Committee.
With that in mind, for its annual State Roundup, Credit Union Journal asked all of the state leagues the following question:
How concerned are you about Sen. Orrin Hatch’s letter asking NCUA to justify the credit union tax exemption, and how is that shaping your lobbying efforts during the upcoming Hike the Hill effort?
Alabama and Florida
Anytime an influential member of Congress like Sen. Hatch sends a letter requesting more information about the credit union tax exemption you have to take notice. The administration and Congress were deliberate in their recent efforts to implement comprehensive tax reform, and at no time was the credit union tax status seriously questioned by policymakers. Why? Congress understands the value credit unions bring to their members and the communities we serve. As for how this affects our lobbying efforts during the CUNA Governmental Affairs Conference, I would say very little. Any time we have the opportunity to visit with our members of Congress, we discuss the value credit unions bring every day and the role our tax status plays in allowing us to help grow the economy, create wealth, and advance the savings for millions of Americans. This year will be no different, except that we will also be thanking them for preserving the tax exemption.
Arizona, Colorado and Wyoming
The letter by Sen. Orrin Hatch (R-UT) has not drastically reshaped our lobbying efforts going into the GAC or Hike the Hill visits. Leading up to our Hike the Hill, we did reach out to some of our key senators and will continue our dialogue.
As we do with any of Hill meetings, our credit unions are prepared to discuss the credit union difference and to explain the reason credit unions are exempt from federal income tax. It is a message every credit union leader already knows, and a message we are happy to share whenever given the opportunity.
In addition to addressing any questions surrounding the Hatch letter, our credit unions and the association will be focusing lobbying around common sense regulatory reform and protecting members from merchant data breaches. Most specifically, we will be asking lawmakers to support S. 2155 – Economic Growth, Regulatory Relief & Consumer Protection Act and pushing for Congress to urge DOJ guidance on our requirements of website accessibility under the Americans with Disabilities Act.
Arkansas, Oklahoma and Texas
The Cornerstone Credit Union League has been proactive in working with members of Congress and staffers to understand the structural differences between credit unions and other financial institutions, and the benefits to consumers derived from the tax exemption. While the Hatch letter is concerning, our strategy for CUNA GAC Hill visits remains unchanged; we will be thanking members of Congress who supported the credit union tax exemption in the new tax legislation. We will be prepared to address any questions that may arise from the Hatch letter, but it will not be the focus of our discussion on the tax issue.
California and Nevada
Our movement’s leaders should never assume the credit union tax status is completely safe. They shouldn’t presume that Congress, whether pressured by credit union adversaries or not, would not pursue an investigation or examination into the benefit of that tax status — which is what Chairman Hatch is doing. We view the strongest defense is an outstanding offense. The California and Nevada congressional delegations have taken great strides to demonstrate support for credit unions and the tax status. Our view is that the job begins in D.C. and continues back home in the district. We take a hands-on grassroots approach to our goal of moving credit unions to the forefront of our congressional delegation’s thoughts. We execute this over multiple platforms, such as year-round district meetings, asking our delegation to show support by co-sponsoring H.R. 389/S.836 (which last session more than 80 percent of our delegation did), or signing letters to chairs of the tax policy committees in support of our tax status (as Rep. Jared Huffman and 16 others did a few years ago). Our membership is fully prepared to validate the CU tax status because that is what they do in their communities. Whether it is financial education, raising funds for natural disasters, or simply refinancing a borrower into a low-interest loan; California and Nevada know how to tell the credit union story.
The letter from the Chairman of the Senate Finance Committee, Sen. Hatch, R-UT, to the NCUA questioning whether credit unions continue to earn their tax exemption was a substantial concern. Although the tax-exempt status is regularly under scrutiny at the national level and in some individual states, this communication was alarming to credit unions and served as a reminder to be vigilant in sharing why credit unions merit their tax exemption.
The Connecticut League asked U.S. Rep. John Larson, D-CT, who sits on the Ways and Means Committee,to organize a joint letter from our congressional delegation reaffirming their support of the credit union tax-exempt status. All of our members signed the letter, writing, “Connecticut’s credit unions have helped their members…plan for their and their family’s economic futures, even during the worst of the financial crisis. It is this unique relationship that we must protect in Congress.”
Support for credit unions just makes sense: Connecticut credit unions use their tax-exempt status to help capital flow in the community, serving those most in need and it is the structure of credit unions that differentiates them from other financial institutions.
Delaware, Massachusetts, New Hampshire and Rhode Island
There have always been challenges to the credit union tax exemption, and that will not change, but time and time again credit unions prove their value though the financial benefits they deliver to their members. Our member credit unions consistently deliver a powerful message to lawmakers on the importance of the tax exemption. As not-for-profit financial cooperatives, credit unions have a value proposition like no other in the financial services landscape. That message resonates with lawmakers who want consumers and small businesses to have choices for financial services. As always, our members will share their unique stories with lawmakers to drive home the credit union difference and the importance of credit unions in the communities they serve, but our lobbying efforts will not focus solely on the value of the tax exemption. We will be sharing data with lawmakers that show the impact of pending legislation that would correctly classify 1:4 non-owner occupied loans as mortgages, not member business loans, freeing up valuable capital that can help fuel small business growth. Members of the association continue to identify the 1:4 issue as a top priority and our message on the Hill will reflect that. We will also highlight the challenge of elder financial abuse and the work our credit unions are doing to mitigate this growing problem that is affecting a vulnerable segment of our population.
We have always been aware that the only way to ensure that the tax status of credit unions remains untouched when Congress addresses tax reform is through constant education of our elected officials. We consistently remind our elected officials and their staff of the value credit unions provide the citizens of Georgia.
In our opinion, Senator Hatch could have written his letter during the tax reform discussions in 2017. He could have written a letter to his colleagues in the Senate. He didn’t do either. Notwithstanding, credit unions must remain vigilant in protecting their ability to provide value to more than 100 million members. So, we’re concerned when the Senate Finance Committee chairman writes a letter questioning the CU tax exemption….to anybody.
During our upcoming Hill visits, we’ll illustrate again that the tangible economic benefits to members (i.e., voters) far exceeds the taxes that could be squeezed from credit unions. They know that a meaningful number of those more than 100 million members would agree… vocally, if need be!
The letter from Senate Finance Committee Chairman Orrin Hatch to NCUA Chairman J. Mark McWatters seemed like it was penned by representatives of American Bankers Association or the Independent Community Bankers of America. The Credit Union National Association did a commendable job in responding to the Hatch letter on a point-by-point basis.
In a speech delivered at CUNA’s Governmental Affairs Conference in February 2004, then-Secretary of the Treasury John Snow put it best. He said, "You're in the business to do good, as well as to do business. That's clear from your motto: ‘Not for profit, not for charity, but for service.’ And let me say to you that I understand you are for service and not for profit, which is the fundamental reason why this talk of taxation of your industry and what you do is something we [the George W. Bush administration] oppose. I think I said here last year, it's a truism I think in economics, you always get less of anything you tax. Well, we don't want to get less of what you do."
We have more than 50 credit union officials “hiking the Hill” this year. We intend to make preservation of the credit union nonprofit tax status our top priority in meetings with Hawaii’s congressional delegation.
Idaho, Oregon and Washington
At CUNA GAC, a key focus for the Northwest Credit Union Association and for the 250 advocates joining us from Idaho, Oregon and Washington is Senate Bill 2155. The Economic Growth, Regulatory Relief and Consumer Protection Act will right-size regulations so that credit unions can better serve their members. We’re appreciative of the leadership of Idaho Senator Mike Crapo, who chairs the Senate Banking Committee, for garnering bipartisan support for this bill. It passed out of committee and is working its way through the Senate with 26 co-sponsors –13 Republicans and 13 Democrats. Oregon Senator Ron Wyden also championed an important provision in this bill, which will correctly classify loans on non-owner-occupied buildings with one to four units, as real estate loans. This frees up capital for credit union business loans to Main Street, USA.
Of course, we and our member credit unions, year-round, vigilantly communicate the value that credit unions’ corporate tax exemption brings to the 6.5 million consumers who are members in the Northwest and across the country. This year is no different in terms of that focus.
As not-for-profit cooperatives, credit unions are uniquely positioned to return direct benefits to their members — which, in the Northwest alone, totaled over $618 million last year. That far outweighs the estimated revenue another tax on credit unions would generate for government spending. And credit union’s not-for-profit, cooperative structure, the value to members, and the impact to communities — is exactly what determines credit unions’ tax exemption — not the asset size, number of members, or financial products they offer.
Of course, we are always concerned when someone in Senator Hatch's position makes seemingly hostile statements about credit unions. However, the context of the Hatch letter coming after tax reform legislation has been enacted is important to recognize. The Hatch letter will not impact our advocacy efforts during our Hill visits because we always spend time talking about the difference credit unions are making in their members' lives and their communities and we always emphasize the tremendous value that the country receives as credit unions return much more value to their members than the government would receive taxing credit unions.
Sen. Hatch’s letter is a concerning example of mis-education regarding the cooperative structure of credit unions and how they work each day to fulfill their mission to serve people over profits.
Locally, we have been working hard to inform Iowans the value of credit unions and create grassroots awareness against an Iowa Senate bill that proposes increasing taxes on Iowa credit unions and their members, while proposing a tax decrease for banks. We stand united in opposition to any tax increase on credit unions and we will use every effort to preserve financial choice for credit union members in Iowa and nationally.
In Kansas, making the case for the credit union tax status is an ongoing effort at both the state and federal level. Equating credit unions to other cooperatives in the state, such as agricultural and electric cooperatives, is part of how we shape the discussion around the not-for-profit cooperative mission of credit unions. Kansas credit unions provide information for the Heartland Credit Union Association’s Credit Union Economic Impact Report, a piece credit union leaders will use during Hill visits at the GAC. The report focuses on the return on investment that comes with the credit union tax exemption, including lending to consumers when other financial institutions can’t or won’t; strengthening the middle class through financial counseling, debt consolidation and initiatives like Prize-Linked Savings; and helping Kansans to keep more of their own money through lower loan rates, better interest on savings and direct dividends.
Sen. Hatch’s letter to NCUA isn’t a new challenge for the credit union industry. As one of the strongest advocates for Louisiana credit unions, preserving the tax status has always been and will always be a top priority for the Louisiana Credit Union League. With that said, our lobbying efforts will not change, only strengthen. We will continue to re-affirm the structural, purposeful, and philosophical-centered mission of credit unions.
Anytime a member of Congress questions the credit union tax exemption it is cause for concern, but our focus when meeting with our delegation is, as always, to highlight how Mainers are better served by credit unions. The value and benefits that credit unions provide to members is greater than ever. In 2017, Maine credit unions provided over $50 million in direct financial benefits to the state’s nearly 700,000 members. In order to continue to serve our members, credit unions must evolve; however, our foundation as member-owned financial cooperatives remains strong. Credit unions were granted a tax exemption for clear and defined purposes and credit unions warrant it every single day through our work with our members, our communities, and the benefit that we provide to our state’s economy.
While the letter from the soon-to-be retired Senator Hatch is certainly concerning inasmuch as it evidences a fundamental misunderstanding of the evolving nature of credit unions within the financial services landscape, the sentiments behind the letter, thankfully, don’t appear to have broad-based support in Congress.
We at the Michigan Credit Union League are always focused on protecting the credit union not-for-profit status. As part of our long-term strategy, for the third time in the last 15 years, we obtained statements in support for the credit union not-for-profit tax status from each of our Congressional delegation members.
While we have enjoyed strong support within the Michigan delegation, we are always vigilant. We always start each of our discussions with key public officials with a focus on the importance of our not-for-profit tax status and how it’s being effectively leveraged on behalf of members and communities across the state.
The credit union tax status reflects the values by which not-for-profit financial institutions operate every day. Helping our elected officials understand why we have our tax status, and how we earn it, is a an ongoing conversation we share during each and every legislative visit.
Missouri’s credit unions consistently reinforce the credit union tax status with our lawmakers. We focus on sharing information about our financial cooperative nature, how our tax status works, and the impact on our communities (their constituents). State and federal lawmakers receive an annual Credit Union Economic Impact Report from the Heartland Credit Union Association, with information provided by Missouri credit unions. It’s a document that highlights the benefits of credit unions –the return on investment from the credit union tax exemption. It shares the our effect on people’s lives – the ways we help put more money in people’s pockets with better rates, interest, and dividends; the financial outreach and education credit unions provide to members and the greater community; and the programs focused on giving people a hand up to financial success. Knowing that the credit union tax status can be brought up at any time by those who oppose us, and our proximity to eight different states where the message may also come up - Missouri credit union leaders proactively bring up the credit union tax status with lawmakers and provide a context for why it exists and why it is important.
In Montana, we view Senator Orrin Hatch’s letter as a reminder that we cannot take our structure for granted nor can we allow others to define our future; credit union stakeholders must actively drive those conversations. When meeting with our congressional delegation, Montana’s credit union executives and volunteers always stress the credit union difference including: absence of capital stock and stockholders, depositor ownership, not-for-profit structure, and volunteer boards. We see our meetings during the CUNA GAC as another opportunity to share credit union ideals. In fact, we’ll likely suggest (again) that the for-profit banking sector might want to join our ranks: why should more than 110,000 million credit union member-owners lose their financial cooperative just to appease big banks? We encourage them to convert to not-for-profit credit unions!
The Nebraska Credit Union League and the state’s 62 credit unions have been and continue to be concerned about efforts attacking the long standing federal tax exemption provided by Congress in the 1930s. We take very seriously any suggestion by anyone or any group that credit unions and their members should lose their tax exemption. These attacks are not new nor do we expect them to stop anytime soon. The protection of the credit union federal tax exemption is and has always been our top advocacy priority because of the consequences to the millions of credit union members should it ever be taken away. We consistently have provided our lawmakers, and anyone who will listen, the many ways in which Nebraska credit unions earn this tax benefit. The Hatch letter is a concern but it does not change our strategy when it comes to defending the tax status. It is incumbent upon us to never take this benefit for granted and that is why we will continue to tell the stories of our credit unions and their members to our lawmakers at all levels of government so that they as policy makers can understand the great value in what credit unions do for not only their members but indeed all consumers.
The bank lobby has relentlessly obsessed over the credit union tax status for decades, and they are fighting a losing battle. The difference between the two industries could not be clearer: The credit union movement lobbies for changes in laws and regulations to benefit consumers and communities, while bankers lobby for laws and regulations that would stifle competition, and impede credit unions from carrying out their mission.
We believe the vast majority of federal lawmakers understand this difference. That’s why the credit union tax exemption—which has benefited tens of millions of consumers—remains codified in federal law.
Sen. Orrin Hatch is an influential and respected member of his conference, but I don’t believe his letter represents a serious threat to the credit union tax status. Still, it was concerning enough that I wrote a letter to NCUA Chairman J. Mark McWatters to offer counterpoints to the senator’s comments and questions.
Otherwise, the senator’s comments do not fundamentally change our advocacy efforts. Preserving the credit union tax status remains among the New York Credit Union Association’s top priorities, and communicating the credit union difference is the cornerstone of our advocacy efforts. As I wrote in my letter to McWatters, it is perfectly reasonable and logical for credit unions to grow and evolve to meet the growing and evolving needs of consumers. But that is certainly not contrary to the credit union mission. Rather, it is the very embodiment of it.
North Carolina and South Carolina
The Carolinas Credit Union League and our member credit unions prepare regularly to remind legislators that our tax status is based on structure and purpose. In our meetings throughout the Carolinas and in Washington, we share with elected officials how many of their constituents are members, as well as the unique ways credit unions return value that far outweighs the potential revenue. Though the letter by Sen. Hatch may bring that conversation earlier in our meetings, its one we always are ready to have.
North Dakota and South Dakota
It’s business as usual on the advocacy front for our members in the Dakotas. Debating the credit union tax exemption has been, and always will be, a focus of our on-going advocacy strategy. We have been battling this issue locally for several years and we will continue to define the debate on our terms. This through a strong and unified voice that credit unions are a relevant and viable part of the Dakota financial landscape and we continue to a better financial choice for families and communities. Educating lawmakers on the credit union difference is key to our sustainable advocacy success.
Protecting credit unions’ existing tax status is always our top legislative advocacy issue. This is particularly true when periodically an elected official like Senator Hatch publicly questions the credit union tax status. Fortunately, in Pennsylvania, we are engaged with all of our state and federally elected officials on an ongoing basis and have receive repeated reassurance regarding credit unions’ tax status. Our credit unions, staff team, and our outside lobbyists consistently emphasize the credit union difference from our structure to our community involvement to our approach to delivering financial services to people of all backgrounds. The low-cost, few- or no-fee products and services our credit unions offer also resonate strongly with our elected officials, regulators and their staff who have grown to understand our different philosophy.
As we approach our Hill visits during GAC, we will talk about the value of the credit union tax status, as we always do, yet we will also be advocating to make the operating environment more favorable for our credit unions so they can better serve their members and continue to grow.
Vermont credit unions are fortunate to have strong support from our communities, state legislators and members of Congress. Still, we have moderate concerns about the Hatch letter, as we would with any such letter, because it serves as a continued reminder that there are no days off when it comes to advocacy. When given the opportunity, the banking lobby continually seeks opportunities to distort the difference that credit unions make to their members as not for profit financial cooperatives owned by their members. They do this for one reason and one reason only . . . they simply don’t want the competition that credit union bring to the marketplace. As a large contingency of Vermont credit union leaders join us at CUNA’s Governmental Affairs Conference, we’re encouraging them to continually stress the difference credit unions make every day in the lives of approximately 58 percent of Vermont’s population.
Sen. Hatch’s letter to NCUA questioning whether the credit union tax exemption remains appropriate public policy while citing market dynamics such as expanded field-of-membership and business lending among other expanded services certainlypiquedour interest. Sen. Hatch, while retiring, remains an important voice, at present, in Washington. Any concern with the letter is offset by the knowledge that we have a good story to tell as to why the tax exemption remains as relevant today as in 1934 when Congress acted to promote thrift by creating cooperative financial institutions whose mission would be to provide affordable credit. Credit unions – like all businesses – have evolved whether the timeline is measured from 1934 or 1998. Communities of interest (common bond) in a world driven by technology will be appreciably different. Industry consolidation and market dynamics requiring economies-of-scale dictate that credit unions look differently than the one-office, one-teller operations of decades past. These things do not change the fact the tax exemption is warranted by our cooperative structure, the mission to promote thrift and provide affordable credit, and the return the investment produces for our members and communities. We must remain vigilant as we defend our position, but we do so knowing confidently that credit unions earn the exemption.
Anytime a member of Congress openly questions the tax exemption of credit unions, we believe it deserves a thoughtful response. In fact, it provides us the opportunity to demonstrate the many ways that credit unions in West Virginia earn their tax exemption everyday. This, in a state that has had its share of economic challenges. Instead of pocketing large profits for a few investors, credit unions in West Virginia have provided affordable financial services to the people who need it the most. Through numerous interactions with our West Virginia Congressional delegation, we believe they understand the struggles of their constituents, and what solutions they have to overcome them. Through volunteer governance, West Virginia’s credit unions have played a central role in providing these solutions and we look forward to sharing these stories during our upcoming GAC Hill visits.
While Sen. Hatch’s letter was disappointing, it was an invitation to do what credit unions do best: highlight the credit union difference. Wisconsin’s credit unions justify their tax exemption every day – by serving members and communities in ways other financial institutions can’t or won’t.
The 2017 Scorecard, which our activists will share with legislators this week, highlights the long history credit unions have serving members and communities. The credit union difference is illustrated in stories about serving the homeless, providing small dollar loans, free financial counseling, and investing in communities.
It also showcases in-school, student-run branches. While the banks operate typically just one or two in the state, Wisconsin’s credit unions offer nearly 100, because it’s in the best interest of their members and communities.
It’s their structure, as member-owned, member-led not-for-profits that ensures credit unions’ priorities remain local and decisions focus on people, not profit. This has been a primary talking point for Wisconsin’s credit union activists both in D.C. and back home.
Our answer to Sen. Hatch’s concerns is simple. Credit unions pay millions in taxes each year including payroll, real estate, personal property and state sales. Another tax on credit unions would be a tax on Wisconsin’s 3 million members. It would put at risk the valued programs and services our credit unions offer, that other institutions, again, can’t or won’t.
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