Credit unions are breathing a sigh of relief as the CU tax exemption remained protected in the Republican tax plan unveiled Thursday.
The House Ways and Means Committee’s tax proposal, known as the “Tax Cuts and Jobs Act,” is a $1.51 trillion plan that cuts taxes on corporations and provides more modest tax cuts for families. Of primary interest to CUs, however, was the protection of credit unions’ tax exemption.
“We’re certainly pleased that the credit union core tax exemption was not touched,” Carrie Hunt, executive vice president of government affairs at the National Association of Federally-Insured Credit Unions told Credit Union Journal, adding “This is a 400-page, complex bill. Anytime you take a comprehensive approach to tax reform you’re going to have an impact in some places versus others. We’re still trying to gauge that, and seeing how it will impact credit unions overall will take a bit of time. For instance, the question of the mortgage income tax deduction and how tinkering with that could have an impact is one issue."
The Credit Union National Association also praised the proposal in its current form, but similarly cautioned that this is by no means the final legislation, and much could still change.
“We thank the House for taking this first step in needed tax reform and like those who are pushing toward reform, CUNA, leagues and credit unions are committed to building and supporting a strong middle class in this country,” CUNA President & CEO Jim Nussle said in a statement. “As of now, the credit union tax status remains unchanged in this bill and the bill looks good from a credit union perspective, but this is an ongoing process and change can happen anytime. CUNA will be thoroughly reviewing the bill and remains engaged with both chambers of Congress as this process continues, ensuring policymakers are fully aware of the credit union difference in the financial services marketplace and in the lives of our 110 million members.”
Not everyone was as happy as the credit union trade groups, though. Predictably, banking trade associations called out the committee for not doing away with the tax exemption.
“The nation’s community bankers remain focused on the priorities laid out in the ICBA Principles for Tax Reform white paper, such as strengthening the ‘pass-through’ model for Subchapter S institutions, preserving the business interest deduction, and promoting tax parity among all financial services providers, including tax-subsidized credit unions and Farm Credit System entities,” the Independent Community Bankers of America said in a statement that otherwise praised the tax plan.
A week of victories, but…
The announcement that credit unions’ not-for-profit tax status would be unchanged was yet another victory for the movement in a week that already saw President Trump sign a repeal of the CFPB’s mandatory arbitration rule, which both trades lobbied hard for.
But Wednesday also saw talks break down between members of the Senate Banking Committee over regulatory relief, and it remains unknown when – or even if – those talks might resume.
“The discussions and ultimate final product relative to reg relief on the Senate side was always going to be much more narrow than the House,” NAFCU’s Hunt told CU Journal. “Certainly [House Financial Services Committee] Chairman Hensarling’s CHOICE Act was a very broad, almost kitchen-sink approach to regulatory relief, and going back to the early part of this year it was anticipated that the Senate would take a much more narrow version.” She added that because the margin for victory in the Senate is much slimmer and Democrats do not want the CFPB’s authority curtailed – “it’s not surprising that there would be more controversy on the Senate side, especially given the vote counts necessary in order to pass legislation, unless it’s part of budget reconciliation.”
Additionally, Sen. Mike Crapo has indicated that talks could resume any time, and neither trade group is stopping their push for reg reform just because discussions have stopped.
“Of course we’re disappointed if any stalling occurs because it’s something our members want and something we continue to push for, but there’s still a lot of potential opportunities down the road,” she said.
