At press time, the fate of the credit union tax exemption was still up in the air.
Members of the House-Senate committee trying to devise a plan to cut the deficit have been discussing an array of proposals, including some that would reduce tax expenditures.
Credit union lobbyists say they haven’t seen the credit union tax exemption on any list but warned that the process is still in flux and something of a moving target.
“We continue to sleep with one eye open to ensure that credit unions aren’t targeted. We haven’t heard that we are any list that is being considered by the committee,” said CUNA Executive Vice President John Magill.
NAFCU Executive Vice President Dan Berger said, “I have not seen that credit unions are on any [target] list.”
Both trade associations have met with members and staff of the 12-member committee to discuss the credit union tax exemption. All of the committee members have received contributions from either or both trade associations.
Some of the Republicans on the 12-member committee offered a package that includes an array of tax increases and spending cuts, including the closing of some tax loopholes.
According to several press reports, the tax expenditures on the chopping block include items that could generate considerable revenue for the government, such as energy-related loopholes and real estate investment trusts.
The Treasury Department in 2005 estimated the annual revenue from eliminating credit unions’ tax exemption would be approximately $1.39 billion.
The panel, made up of six members of the Senate and six members of the House, has until Nov. 23 to deliver its report to Congress. Lawmakers in each chamber have until Dec. 23 to hold an up or down vote on the package presented by the committee.
The Obama administration has not been active in the committee’s negotiations, and it wasn’t especially keen on the creation of the panel, which was part of last summer’s agreement leading to the raising of the debt ceiling.
The administration hasn’t taken a position on whether the credit union tax exemption should be continued.
In the summer of 2010, an outside advisory board appointed by Obama to recommend changes in the tax system concluded that “unlike other financial institutions like banks and thrifts, credit unions do not pay corporate taxes on their income. Eliminating this exemption would raise revenue and level the playing field but would clearly raise taxes on credit unions."
The last time there was a major tax overhaul in 1986, the credit union tax exemption was one of the items that was targeted but survived.
While the tax exemption is important to credit unions, the amount of revenue that eliminating it would raise wouldn’t make much of a dent in the federal deficit.