Motley Fool Article Makes the Case for Credit Unions' Tax Status

Posted by Marissa Anema Monday, September 16, 2013 11:53:00 AM

A recent article on the Motley Fool and NASDAQ Web sites points out the holes in banks’ argument against credit unions’ not-for-profit tax-exempt status.

The article, titled “Should Credit Unions Pay Taxes?” highlights credit unions’ boost in popularity after the financial meltdown that left banks raking in bail out money and hiking their fees to recoup losses.

Now banks are fighting back, the article points out, with bank lobbyists waging a battle against over whether credit unions should continue to benefit from a tax exemption they've had ever since the Great Depression.

Banks think it's unfair that they have to pay taxes while credit unions don't despite the fact that banks are treated just like any other profit-making enterprise profit-making enterprise, and get taxed accordingly. By contrast, credit unions pay no federal tax, the article explains. With their structure as member-owned cooperatives, credit unions “plow their profits back into their banking products, offering higher interest rates on their deposit accounts, and lower rates on loans.”

The article then points out other tax disparities in other industries, including higher education, where for-profit enterprises are taxed accordingly, demonstrating that credit unions’ tax-exemption isn’t “all that peculiar”.

One argument the banks are clinging to is that this exemption creates a competitive disadvantage against credit unions. However, credit unions still make up only a small fraction of the banking-services industry, the article points out, with traditional banks having about 15 times the financial assets that credit unions hold, and “keeping tax-exempt status for credit unions doesn't seem like an unfair way of keeping the playing field relatively level.”

According to the article, investors in for-profit banking institutions also shouldn't worry about credit unions as a big threat. “The fact is that banks are still highly profitable, yet their stock prices don't fully reflect their future potential.”

To read the article in its entirety, click here. If you feel that credit unions should be allowed to keep their tax-exempt status, let your legislators know by visiting www.donttaxmycreditunion.org and using #DontTaxMyCU in tweets directed at your legislators. 

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