WASHINGTON – CUNA yesterday participated in a House Ways & Means Committee briefing on the credit union tax status, talking to four members of the powerful tax-policy committee and about 15 staffers. CUNA President/CEO Bill Cheney underscored that the U.S. Congress conveyed an exemption from federal income tax to state and federally chartered credit unions because of their ownership structure and special mission.
After the meeting Cheney reiterated that preserving the credit union tax status continues to be a top CUNA priority. He said CUNA was at the meeting to share the public policy reasons for the credit union tax status: "Credit unions are Americans' best option for financial services, and the credit union tax status represents one of the best investments that the government makes in its citizens. Not all tax preferences are alike. Some benefit a small group. Others encourage socially beneficial behavior. The credit union tax exemption clearly falls into the second category."
Credit unions were first made tax-exempt by a ruling by the U.S. Attorney General in 1917, less than 10 years after the first one appeared in this country and 17 years prior to the enactment of the Federal Credit Union Act. CUNA reminded the tax-policy staffers that the exemption has been reaffirmed many times, including in 1935, 1936, 1937, 1951, and 1998.
Credit unions behave differently from for-profit institutions due to their not-for-profit financial cooperative structure, the CUNA group said. That structure allows credit unions to focus totally on member value and service, and, overall, prevents them from taking the types of risks banks take in the name of profits.
This resulting difference in behavior creates substantial benefits for both the nation's 96 million credit union members and non-members as well, they said. Members benefit from lower rates on loans, lower fees on services, and higher returns on deposits. Credit union focus on exceptional service also keeps competitive pressure on banks to the benefit of consumers.
Cheney and the CUNA group noted these economic benefits provide gains to tax-paying credit union members and other consumers that far outweigh any funds that would be brought in by imposing a federal income tax on credit unions: While the Joint Committee on Taxation estimated the credit union "tax expenditure" represents one-half billion dollars in unclaimed government revenues in 2012, CUNA estimates that credit unions gave $8 billion back to their members in the form of low fees, low rates, and other benefits.
CUNA noted that a tax on credit unions is a tax on 96 million Americans who are their members.
Further, CUNA pointed out, credit unions provide full and fair service to all members and more than half of the members that rely on credit unions for their primary financial services are middle class Americans, bringing in annual incomes of $25,000 to $75,000.
The credit union tax status was the sole topic of the briefing, which was also attended by other stakeholders.