At a hearing this month, House Ways and Means Chairman Bill Thomas rejected banks' calls to make big credit unions pay federal income tax, but he criticized credit unions' federal regulator for not collecting data showing how well the industry serves people with modest incomes.
Picking up that cue, one banking trade group has proposed subjecting credit unions with more than $25 million of assets to a Community Reinvestment Act-like regulation. Those that do not derive three-fourths of their income from households with modest incomes would have to pay federal income tax.
America's Community Bankers submitted the proposal to the Ways and Means Committee late Thursday.
Diane Casey-Landry, the trade group's president and chief executive officer, said that 65% of credit unions have less than $25 million of assets and therefore would not be considered for taxation under ACB's proposal. The group is targeting large credit unions with community charters that offer "diverse, high-end financial products and services," Ms. Casey said.
At the Nov. 3 hearing lawmakers gave no indication that they plan to introduce a bill to eliminate the exemption. But the hearing did shed some unexpected light on the fact that the National Credit Union Administration does not require credit unions to submit financial data detailing how well they serve people of modest means.
Rep. Thomas, R-Calif., conducted a long and sometimes testy questioning of the NCUA's chairman, JoAnn Johnson, in which he blasted the regulator for the omission and urged it to begin collecting lending data.
Ms. Johnson rejects a CRA-like regulation for credit unions, but Rep. Thomas' comments clearly resonated with her. In a speech Wednesday, she called on credit union executives to submit anecdotal accounts of the work they do serving people of modest means.
"America's credit unions are known for their good work in reaching into the depths of communities, especially those who have been left behind to predatory lenders," she said. "The real challenge of this good work is documenting and singing your own praises."
Gary Kohn, the vice president of legislative affairs for the Credit Union Mutual Association, said Friday that some kind of reporting standard for credit unions is inevitable.
"We got the message," he said. "We understand that we have to take Chairman Thomas seriously."
Still, even if credit unions are required to document their lending practices, Mr. Kohn does not see its doing so as a first step toward taxation.
He called ACB's proposal a "nonstarter."
"For years ACB has been throwing pots of spaghetti up against the wall to see what sticks; well, this ain't sticking," he said. "Chairman Thomas made it pretty clear he doesn't want to tax credit unions."
A spokesman for Rep. Thomas did not return calls.
ACB also proposed requiring federally chartered credit unions to file Form 990, as other nonprofit organizations do. Federal credit unions are currently exempt from any requirement to file the forms, which disclose, among other things, how much a nonprofit pays its senior executives.
State-chartered credit unions are required to file Form 990.
