Repeal of Tax Exemption a Death Knell?
A death sentence for credit unions? An impetus to change the business model?
Those are among the scenarios offered as possible outcomes if credit unions lose their tax-exempt status.
State Employees' Credit Union President/CEO Jim Blaine contends that the credit union model even without the tax exemption would be appealing, especially since credit unions might not be hampered by some of the current restrictions on their activities.
"If you tax credit unions, the business lending restrictions come off, and the field of membership restrictions come off," he said. "Under the current model, credit unions can accumulate reserves and don’t have to pay anyone [investors] for that. They are accountable to their members not investors, who have a primarily financial motivation. That will still be appealing, regardless of the tax status."
In countries where credit unions have been subject to taxation recently, such as Australia and Canada, there have been changes in the core mission of some credit unions and there have been more credit union mergers, according to the World Council of Credit Unions.
"In Australia, outreach to low- income communities isn’t at the front of the service offerings of as many credit unions," said WOCCU Senior Vice President David Grace.