CUNA Refutes Bank-Backed Study On CU TaxExemption

WASHINGTON - (03/30/05)–CUNA is slamming a recent studysponsored by the Independent Community Bankers Association thatsuggested credit unions should be taxed. The study, which wasconducted by the Tax Foundation study at the behest of the ICBA,was distributed to congressional offices just as the credit unionfaithful were gearing up for the Hike The Hill effort duringCUNA’s GAC. The 14-page response from CUNA refutes four mainpoints posited in the Tax Foundation study: 1) CUs should be taxedbecause their FOM restrictions have been loosened and their serviceoptions have grown since the tax exemption was put in place in the1930s (CUNA argued the exemption is based on the structure ofcredit unions, not FOM or product and service restrictions); 2) theCU tax exemption doesn’t create any financial benefit for CUmembers (CUNA cited copious examples of the way CU members benefitfrom the tax exemption, suggesting they benefit by about $6.5million every year); 3) Instead of returning profits to members,CUs build up net worth for their owners (CUNA noted that CU membersARE the owners of credit unions and net worth levels are mandatedby PCA); and 4) the CU tax exemption creates a disruption in themarketplace (CUNA suggested that record profits at banks for thelast few years indicate there is no such disruption and noted thatif a tax exemption for CUs disrupts the market, then so, too, wouldthe Subchapter S tax status for certain banks, with which bankersdon’t seem to quarrel).