WASHINGTON – Leading bankers told Congress this afternoon any increase in member business lending limits for credit unions should come in exchange for changes to the credit union tax exemption.
“Simply stated, credit unions are tax-exempt for a reason and were never meant to be commercial lenders. If they want to break from their tax-exempt purpose then they must pay taxes,” Salvatore Marranca, president of Cattaraugus County Bank in New York, told lawmakers during this afternoon’s hearing on a bill to increase the cap on MBLs.
The New York banker, chairman of the Independent Community Bankers Association, and a separate witness for the American Bankers Association, made clear to members of Congress they will continue to fight the bid by credit unions to raise the 12.25% of assets limit on MBLs, unless credit unions agree to put the tax exemption on the table.
Among the options put forward by the bankers are easing the way for credit unions to convert to mutual savings bank with much higher business lending limits, or to repeal the tax exemption for the largest diversified credit unions that have the biggest business lending operations.
“If credit unions would like to have the discussion about exchanging their tax status for increased business lending privileges, we will be the first one at the table,” said Rose Oswald Poels, president of the Wisconsin Bankers Association, in conjunction with today’s hearing.
Several lawmakers expressed agreement with the bankers’ position. Republican Blaine Leutkemeyer of Missouri said he sees the bill “as an effort by the credit union industry to try to move into another area without having to play by the same rules (taxation) others in that area are playing by.” Democrat Ruben Hinojosa of Texas wondered about the repeal of the tax exemption in conjunction with an increase in the MBL cap.
The credit union lobby has been fighting to increase the limit on MBLs since 1998, when the bankers succeeded in getting Congress to set a cap on business loans for the first time as part of HR 1151, the CU Membership Access Act. Congress has introduced bills at least ten times since then to raise the limit, all blocked by the powerful banking lobby despite broad support in Congress. Today’s hearing before the House Financial Services Committee was on the latest bill, which would raise the limit all the way to 27.5% of assets.
Testifying for credit unions in favor of the increased limit were: Jeff York, president of CoastHills FCU on behalf of CUNA; Gary Grinnell, president of Corning CU on behalf of NAFCU; Michael Hanson, president of the Massachusetts CU Share Insurance Corp; and NCUA Chairman Debbie Matz.
