The credit union tax exemption is safe for the foreseeable future on the federal level, not withstanding the interest being drummed up on Capitol Hill by the bankers over the issue.
The latest salvo came last week when Don Powell, chairman of the FDIC, told attendees of the America's Community Bankers annual convention that he favors credit union taxation. "There's no secret where I stand on that," said Powell, former Chairman and CEO of Boatmen's First National Bank in Amarillo, Texas. "They should be paying taxes. I said that many, many years ago when I was a banker, and I'll say it again."
The Bush Administration official's remarks came moments after Treasury Secretary John Snow reiterated the Administration's stance opposing credit union taxation, enunciated two weeks before during CUNA's GAC. "We are not in favor of new taxes on business. This is a long-standing policy," Snow told the bankers.
The cross signals delivered by Bush Administration officials came just days after the bankers thought they had a major breakthrough on the tax issue when House Ways and Means Committee Chairman Bill Thomas of California said he plans to probe into the continued legitimacy of federal tax exemptions by groups like non-profit hospitals and credit unions. The bankers, of course, seized on the senior lawmaker's remarks, as hundreds of their numbers were coming to Washington for the annual lobbying pilgrimage.
But independent observers and credit union partisans alike are confident that broad-based tax proposals, such as repeal of the credit union exemption, are doomed to fail, at least in the short term. As John McKechnie, chief lobbyist for CUNA, pointed out, a proposal to tax 84-million Americans is not likely to be seriously considered by Congress as elections loom.
Still, this issue is sure to play a major role in coming years on Capitol Hill, especially as credit unions begin their own lobbying for additional regulatory relief. To be sure, the bankers will bring up the tax issue at every discussion of the pending regulatory relief bills for credit unions.
