Exemption On the Firing Line
Credit unions are on alert about the fate of their tax-exempt status as a result of President Obama’s speech outlining his deficit reduction strategy.
In his April 13 speech, he called for reviewing “tax expenditures,” which include the tax-exempt status of credit unions. He said any reform should build on the calls made by his deficit-reduction commission to reduce “tax expenditures so that there is enough savings to both lower [tax] rates and lower the deficit.”
John McKechnie, a lobbyist and former NCUA and CUNA executive, said Obama’s comments are cause for concern among credit unions, but they shouldn’t panic.
“It should give credit unions reason to be watchful. It is the beginning of a long process. And while there is a large reservoir of good will toward the industry on Capitol Hill, credit unions are going to be under constant attack from the banking lobby.”
Obama's Economic Recovery Board raised the possibility in a report issued last summer on ways to simplify the tax system and raise revenue.
“Unlike other financial institutions like banks and thrifts, credit unions do not pay corporate taxes on their income,” the report noted. "Eliminating this exemption would raise revenue and level the playing field but would clearly raise taxes on credit unions.”