WASHINGTON-The most recent attack on credit unions' taxexemption has caught the eye of consumer groups, mainstream media,and others outside of the credit union-bank battle. One of thehighest ranking officials to recently take note of the credit uniontaxation challenge by the bankers was Senate Banking CommitteeChairman Richard Shelby (R-Ala.). During a session with reporters,Dow Jones Newswires quoted Shelby as stating, “I'm not for taxes.I'm not for taxing credit unions. You start taxing credit unions,you know who's going to pay the taxes-the members.” CUNA VicePresident of Legislative Affairs and Senior Legislative CounselGary Kohn commented, “That is a very, very important statement fromour perspective. It really marks the first time that I know of thatChairman Shelby has publicly stated that position and he'sobviously a very powerful player in the Senate.” “We're pleased tosee comments from the Senate Banking Committee Chairman in thatregard,” NAFCU Director of Legislative and Political Affairs BradThaler echoed. CUNA quickly penned a letter to the senator,thanking him for his comments in favor of maintaining creditunions' tax-exempt status signed by President and CEO Dan Mica.“Above all, Chairman Shelby, please accept my sincere thanks forthese comments about the tax status of credit unions. Coming fromyou, these words will have a very happy effect on the people whomake up the credit union movement, particularly those in your homestate of Alabama,” Mica wrote. He added, “And, as you have wiselycommented, a tax on credit unions is a tax on the members – 84million consumers nationwide.” Mica said he looked forward toworking with Shelby in the future on issues affecting creditunions. The Dow Jones story also noted Federal Deposit InsuranceCorp. Chairman Don Powell's recent remarks and letter exchangedwith CUNA on his position in favor of taxing credit unions. CUNAhas been exchanging letters with the FDIC chairman since he beganpublicly stating that credit unions should be taxed. These commentshave caught the attention of some major consumer advocacy groupswho not only disagreed with Powell's position but also his place inmaking comments on such an issue. Consumer Federation of AmericaExecutive Director Stephen Brobeck and Consumers Union RegulatoryCounsel Janell Duncan recently sent a joint letter to ChairmanPowell expressing “deep concern and disappointment” over his recentcomments in favor of credit union taxation. “The ConsumerFederation of America and Consumers Union strongly believe thecurrent federal tax exemption for all credit unions, regardless ofsize, should be preserved,” the groups' leaders wrote. “Thetaxation that you have called for would not only significantlyweaken the capital position of credit unions, as recently noted byNational Credit Union Administration Chairman Dennis Dollar, itwould severely limit their ability to serve their members in thefuture,” the letter read. It also noted that CFA revised itsexisting policy to clarify that it supports preserving the currentstate tax exemptions in light of increased banker attacks. Theletter continued, “Chairman Powell, we are puzzled as to why youwould take a public position on an issue that seems unrelated toyour role as a federal regulator and insurer of the U.S. bankingsystem and would in fact work to the detriment of on importantcomponent of that system. Such an action is unprecedented forsomeone in your position. Moreover, it runs counter to the policyof the Bush Administration reaffirmed by Treasury Secretary JohnSnow just weeks prior to your statements.” The letter concluded byasking the chairman to refrain from commenting further on creditunion taxation. CUNA's Mica issued a statement thanking CFA andConsumers Union for their public support of credit unions'tax-exemption. “Consumers get it: Credit unions' tax status lies intheir structure as not-for-profit and cooperatively owned financialinstitutions, which are democratically controlled and provideaffordable, quality financial services. The banks that Mr. Powellsupervises may say that a `level playing field' is at issue, but wecontinue to maintain that a level playing field makes sense only ifthe game is between players of the same species. It is quite clearthat credit unions and banks are different-and that the playingfield is already level enough, although perhaps tilted toward thebanks.” In related news, America's Community Bankers recently senta letter applauding House Ways and Means Committee Chairman BillThomas' (R-Calif.) recent remarks that he is interested in studyingsome non-profits'-such as credit unions'-societal value versustheir tax-exempt status. “Our economy is built on free and faircompetition,” ACB Executive Vice President and Managing Director ofGovernment Relations Robert Davis wrote. “However, the free marketis being disrupted by tax subsidies provided to large, complexcredit unions that compete head-to-head with tax-paying communitybanks.” ACB cited a Treasury Department study showing that “thecredit union tax exemption will cost taxpayers and the U.S.Treasury $1.36 billion in the coming fiscal year and $7.88 billioncumulatively through 2009.” The letter also stated that creditunions are more diversified and mature than the mutual savingsassociations that lost their tax-exemption more than 50 years ago.“Thank you for acknowledging that Congress did not intend taxexemptions to be used to establish parallel industries that competedirectly with commercial businesses, offering the same products inthe same markets,” Davis concluded. “We believe that diversifiedcredit unions offering the same products and services as communitybanks should pay taxes. Please hold formal hearings to examine thisproblem further.” In response to ACB's letter, CUNA's Kohn stated,“We're not aware of any response to that but as we've been tellingyou for some time now our efforts appear to be paying somedividends. We're hopeful that there will not be any such hearingthis year, so the fight goes on. It appears that a lot of theefforts being made by the bankers actually are resulting in verypositive statements in support of credit unions.”[email protected]