WASHINGTON — The long-standing credit union tax exemption was preserved in a draft tax reform plan unveiled by the chairman of the House Ways and Means Committee last week.
In a press conference, Ways and Means Committee Chairman Dave Camp (R-MI) said the CU tax exemption "is not going to be addressed in this bill."
Though Camp's discussion draft is essentially "hands-off" on the CU exemption, NAFCU CEO Dan Berger said his group will review "the document closely for any other provisions that may be important to credit unions, including its treatment of unrelated business income tax. Federal credit unions are exempt from UBIT due to their status as instrumentalities of the federal government, and NAFCU is working to ensure that continues."
This draft is good news and consistent with what NAFCU lobbyists had been hearing all along, said Berger. "Congress has no appetite for repealing credit unions' federal tax exemption."
But CU trade groups say they will not let down their guards.
"We know the tax reform process will be long, and will not conclude until a president signs a tax reform bill," said CUNA President and CEO Bill Cheney. "Throughout the process, credit unions will continue to actively advocate for the credit union tax status."
The fact that the discussion draft did not change or eliminate the specific credit union federal tax exemption is an "endorsement of our long-held position that credit unions' cooperative, not-for-profit structure remains the bedrock upon which the tax exemption is built." said Cheney, adding that it "reinforces" CUNA's "Don't Tax My Credit Union" initiative. Cheney said that effort has allowed CUNA, the state leagues and individual CUs to amass about 1.3 million contacts with lawmakers on this issue.
But Camp's package wasn't so well received by banks, in part because it would put teeth into Republican attacks on "too-big-to-fail" institutions.
Some banks and other financial powerhouses designated as "Systemically Important Financial Institutions" by the Financial Stability Oversight Council would be mandated to pay a quarterly 0.035 percent tax on their world-wide consolidated assets over $500 billion.
"The banking industry strongly opposes the bank tax included in Chairman Camp's tax reform proposal," said Frank Keating, ABA president and CEO in a statement. " At a time when policymakers want more loans to be made, this arbitrary bank tax would do precisely the opposite. More than $86 billion a year wouldn't be available for lending, with a real-world impact that's far worse."
Camp's proposal is the initial salvo in an effort to enact the first major overhaul of the tax code since 1986, but Senate leaders have indicated they will not take up tax reform this year (see related story on this page).
