Taxpayer advocacy group ties lifting MBL cap to greater transparency
The National Taxpayers Union is urging Congress to implement reforms to the credit union industry's tax-exempt status.
The group, which is a conservative advocacy organization, argued for several changes, including requiring federal credit unions to fill out IRS form 990, according to a letter sent to chairs of the Senate Banking Committee and House Financial Services Committees on July 16. That IRS document provides the public with financial information about a non-profit organization and is currently filled out by state-chartered credit unions.
Additionally, the National Taxpayers Union argued that large credit unions are no longer adhering to field-of-membership requirements and are serving "nearly anyone." Because of that, Congress should also "reestablish and clarify sensible common-bond requirements that are a condition of credit unions’ unique status."
Overall, the letter argued that changes should be enacted to ensure greater transparency and fairness before lawmakers considered lifting the member business lending cap.
“[O]ver the past several years persistent, increasingly urgent issues surrounding transparency, oversight, and unfair competition in the credit union industry have arisen,” Thomas Aiello, policy and government affairs manager for the National Taxpayers Union, wrote in the letter. “Before Congress can contemplate any increase in the MBL cap, immediate reforms must be undertaken."
The National Taxpayers Union had previously supported lifting the MBL cap because it "strongly advocates for the removal of government-imposed barriers that inhibit lending and access to capital," according to the letter. Less than 1% of credit unions are at risk of hitting the cap, which is 12.25% of a credit union's total assets, according to the letter.
But the group has also argued for ending the tax-exempt status for credit unions, arguing this gives the industry an unfair advantage over other lenders and that point was iriterated in the July 16 letter.
Additionally, the group suggested that any assets that a credit union acquires from outside of the industry, such as an advertising agency, and MBLs should be subject to the same taxes that other financial institutions pay.
“The marketplace for acquisitions is steeply tilted in favor of credit unions,” Aiello wrote. “Credit unions purchase banks with dollars they have accumulated on a tax-free basis, allowing them to outbid tax-paying banks.”