Like Captain Renault in Casablanca the credit union industry’s first response to proposals to eliminate their tax exempt status is to “round up the usual suspects” and the usual suspects are bankers or their trade association. They cannot believe that policymakers can independently arrive at a conclusion that banks and credit unions with similar characteristics should be treated equally for tax purposes.
The President’s Economic Recovery Advisory Board (PERAB) listed eliminating the credit union tax exemption as one of the many tax-reform options.
“Unlike other financial institutions like banks and thrifts, credit unions do not pay corporate taxes on their income. This puts them at a competitive advantage relative to other financial institutions for tax reasons,” the report said. “Eliminating this exemption would raise revenue and level the playing field, but would clearly raise taxes on credit unions.”
This reform would ensure that businesses with similar characteristics are treated equally.
However, the editor of Credit Union Times weighed in saying that “[i]t was highly disappointing–and frankly disrespectful–to see the bankers’ shtick that taxing credit unions would "level the playing field" in the report. Not only is it obvious the bankers likely weighed in on this report, but it also shows a complete lack of understanding of the other restrictions credit unions operate under.”
There was a similar response from the credit union industry when in 2008 Treasury released its Blueprint for a Modernized Financial Regulatory Structure.
Treasury wrote: "Some credit unions have arguably moved away from their original mission of making credit available to people of small means, and in many cases they provide services which are difficult to distinguish from other depository institutions. While credit union size is not a perfect proxy for this trend, the increasing share of credit union assets held by larger credit unions indicates movement toward a broader focus."
Believing that the Blueprint was part of a nefarious plot by the banking industry to bring about the demise of the credit union industry, CUNA filed a request under the Freedom of Information Act (FOIA) for all material from the banking industry associated with the Blueprint.
In filing the FOIA request, CUNA wrote: “The general public and nearly 90 million credit union members have a right to know if special interests have attempted to influence Treasury policy, as expressed in the Blueprint, in order to eliminate not-for-profit cooperative financial institutions.”
However, more than two years later, I have not heard a peep from CUNA about its FOIA request and what they found.
