Tuesday, August 11, 2015

CU Exec Comment on CU versus Sub S Taxation Deserves Several Pinocchio Noses

In a recent opinion piece, John Gibardi, President and CEO of Entertainment Industries FCU, wrote:

Credit union member-owners pay personal income taxes on interest and dividend income from their credit union. In fact, when it comes to Federal corporate and personal income taxes, credit unions are taxed identically to one-third of all U.S. banks, those established under Federal law as “Subchapter S” corporations.

Let's fact check this statement for accuracy.

Mr. Gibardi is correct that credit union members pay personal income taxes on interest and dividend income from their credit union; however, he is incorrect to state that credit unions are taxed identically to banks established as Subchapter S corporations.

With a Subchapter S corporation, income and losses of the business are passed through to shareholders and included on their individual tax returns. This allows Subchapter S corporations to avoid double taxation on the corporate income. As a result, there's just one level of federal tax to pay instead of two.

In comparison, the net income of a credit union goes untaxed at both the corporate level and the personal level. In other words, there is not any level of federal taxes paid on credit union net income.

If credit unions were taxed identically to a Subchapter S corporation, then the credit union members would have to pay personal income taxes on the net income of the credit union. This is not the case.

It is obvious that his statement that credit unions are taxed identically to Subchapter S banks has a significant factual error and deserves a rating of several Pinocchio noses.

Read the opinion piece.

5 comments:

  1. He is a naive victim of the CU(not accountable) NA propaganda machine. From mica to Cheney to nussle to the ultimate in fairy tale weaving Hample), when the they run out of a legitimate argument they create, cut, paste and forward misinformation...and the minions simply hit the enter and replay buttons.
    Maybe we misunderstand and they are ASKING to be taxed federally on the net income of the credit union.
    That we can get access to capital and more capacity for small business lending?
    Oh, but then we wouldn't need Cuna or Nafcu!
    Or NCUA!

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  2. Your point is well taken. However, you did not review the next paragraph of the piece. The one that stated credit unions and Sub S banks do not pay federal corporate income taxes. I know why. That statement is true and one that the ABA and its members keep pushing to expand.
    I admit that facts (like statistics) can be presented in a way that meets the specific person's desires. But at the end of the day. Facts are facts. Sub S banks do not pay corporate income taxes to the federal government. Thus taking legal advantage of a tax loophole that is not available to most shareholders of C corporations. Those shareholders see their investments taxed twice - once at the corporate level and again when they receive dividends.

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    Replies
    1. Omg.
      Are you serious?
      Your point is meaningless as it relates to the repetitive and droning myth of a battle cry that Cuna and minions have been making that sub s are like credit unions and don't pay federal tax on income.
      The OWNERS of the bank pay taxes on the banks' income. Cu members don't.
      Dan Berger and Cuna have brainwashed themselves and many credit unions. It works really well when they repeat this garbage and people stop thinking.
      Go ahead and live the lie, embarrassing as that is.
      We have told our board the truth.

      Delete
  3. Dear Mr. Gibardi (and the NJ League/CUNA),
    May I suggest that the 3 of you take a deep breath and consider a change in course. Seeing as how the nj league, Cuna ( and Nafcu) have FAILED at any legislative reform for credit unions (despite MILLIONS) spent. And further, mr gibardi as how you pay your members a whopping 11 bps on shares, lose money all of the last 4 years and whack your members with a 5+% expense ratio on the monstrous $13M in assets...
    ...let me suggest after the deep breath that you put your pen down, stop writing stupid stuff that embarrasses good credit unions and maybe do a little strategic planning on how to fix your own pile of crap.
    What do you say??!

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  4. Good job Gibardi - You have shrunk your credit union to success. Year end 12-2008 Assets were $16.6M. June, 2015 Assets are down to $13.2M. Meanwhile you show losses to wit: 12-2009 $-337,000. 12-2010 $-165,000, 12-2011 $-96,000, 12-2012 $-10,000, 12-2013 $-58,000 and thru June,2015 $-18,000. At least you are consistent. Is this the best CUNA can show? You need to spend less time being the cheerleader for CUNA and spend some time back at your shop. There is nothing entertaining in your balance sheet or income statement.

    ReplyDelete