Ex-CUs Fight New Tax Battles

FIFE, Was. - (03/25/04) -- Credit union converts are trying newinnovations to stave off the tax man after abandoning theirtax-exempt roots. Rainier Pacific Financial Group, formerly RainierPacific CU, is one of the first converted credit unions to chartera tax-exempt charitable foundation as part of its conversion tostock form. Under the plans, the credit union-turned-bank hops todeduct as much as a third of the $6.3 million worth of stock andcash it has contributed to the foundation from its federal taxes.The purposes of such foundations are two-fold, according to RichardGarabedian, a Washington attorney specializing in the conversion ofmutual thrifts. "You get a tax benefit, but you also put money backinto the community," he told The Credit Union Journal. RainierPacific, the holding company for Rainier Pacific Savings Bank,hopes to qualify the newly chartered foundation as a non-taxableentity with the IRS as a 501 (c) (3). Among the conditions imposedby the IRS on these kinds of foundations are that a minimum of 5%of the average fair market value of its net investment assets bedistributed annually.