To help close its $1.3 billion budget gap, Pennsylvania is considering a proposal to reduce or eliminate tax exemptions for nonprofit organizations — including credit unions.

The Pennsylvania Credit Union Association has opposed the idea, which the trade group says would make its members less competitive against banks.

Jim McCormack, the group's president, pointed to the role that credit unions recently played in supporting state workers in an Aug. 14 letter to Jack Wagner, Pennsylvania's auditor general. Wagner has recommended the tax change to Gov. Ed Rendell and the General Assembly as an alternative to raising current tax rates.

Credit unions helped state workers who had not been paid for more than a month by providing 0% or low-interest loans before a temporary bridge budget was passed this month that allowed workers to be paid and receive their back pay.

McCormack's letter also said: "Credit unions focus on service to members, rather than squeezing the last dime from each and every transaction. Changing the tax status of credit unions would change the dynamics of the credit union business model. … Creating a tax on credit unions would disrupt the balance of market competition."

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