WASHINGTON The government may be in shutdown mode but not the decades-old battle between credit unions and bankers, with the American Bankers Association on Tuesday calling on lawmakers to add the repeal of the credit union tax exemption to the impending tax reform bill.
“As you start the process to reform the United States tax code, the American Bankers Association strongly recommends that the tax-exempt status for credit unions especially large, complex credit unions be repealed,” wrote ABA President Frank Keating to the Republican and Democratic leaders of the tax-writing House Ways and Means Committee, and copying all 435 House members.
The new ABA bid comes as CUNA is holding a virtual “Don’t Tax My Credit Union” rally today, hosted at the Credit Union House, a block from the Capitol, with participants urged to express their support for the credit union exemption via tweets, pictures, vine videos, and emails to their members of Congress. The physical rally at Credit Union House will feature several speakers, including the head of the American Consumer Institute.
In fact, CUNA had more than 150 executives from 10 of its state leagues on Capitol Hill yesterday lobbying against repeal of the tax exemption, just as the bankers’ letter was being delivered. “Nothing activates our credit union members more than the bankers trying to suggest what the future of credit unions should be,” John Magill, chief CUNA lobbyist, told Credit Union Journal.
He said most members of Congress were at work in the Capital yesterday and many were meeting with credit union representatives, despite the government shutdown.
The ABA’s Keating told lawmakers that recent Office of Management Budget estimates project the credit union tax exemption at almost $10 billion over the next five years. “With large annual federal deficits, our country can no longer afford to subsidize the $1 trillion credit union industry, which increasingly operates like a tax-free banking system,” wrote Keating.
“Credit unions,” argues Keating, “serve the same markets as banks particularly community banks and there is no practical limitation on who a credit union can serve. In fact, the public does not differentiate between banks and credit unions.”
“As you and your colleagues in the House debate reform of the United States tax code, consider the fact that 208 credit unions have assets over $1 billion,” wrote Keating. “Each one of these credit unions is larger than 90% of taxpaying banks. More fundamentally to the tax debate, these 208 credit unions 3% of the entire credit union industry account for 62% of the tax expenditure. These large, fast-growing, and increasingly complex credit unions have diversified to the point that they bear no resemblance to the traditional credit unions that Congress envisioned to be worthy of preferred tax status. They often no longer use credit union’ in their names and advertise that they are just like banks.”
The credit union lobby was quick to answer the banking lobbyist. “The ABA seems intent on ignoring the impact of taxation on consumers,” said John McKechnie, a lobbyist for several state credit union leagues. “That's not surprising, but it's unfortunate, and it explains why they're losing the argument on Capitol Hill."
