Eliminating the federal tax exemption for credit unions is included in H.R. 6474, the House bill that contains the seven immediate reforms recommended by the National Commission on Fiscal Responsibility and Reform.
While the possibility has been regularly raised on Capitol Hill, this is the first time since the Reagan years that the credit union exemption has been specifically put on the table in a piece of legislation, observers said.
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Also known commonly as the Simpson-Bowles commission, the bi-partisan panel was created by President Obama in 2010 to study and propose ways to improve the nation’s fiscal health.
In this case, among a list of exemptions to be eliminated, H.R. 6474 states that it would eliminate in five equal steps over five years beginning in the 2013 tax year the following:
“(9) Section 501(c)(14) of such Code (relating to credit unions without capital stock organized and operated for mutual purposes and without profit) and section 122 of the Federal Credit Union Act.”
The bill was introduced Sept. 20 by U.S. Rep. Dennis Ross (R-Fla.) and declares as its purpose: “To adopt the seven immediate reforms recommended by the National Commission on Fiscal Responsibility and Reform to reduce spending and make the Federal Government more efficient."
Nate Muniz, public and government relations specialist with the $4 billion Pennsylvania State Employees Credit Union, said despite the introduction date, its details are just now being published. He also said he’s not surprised eliminating the tax exemption has now been legislatively proposed, but that he also does not think it will easily pass.
“I think we felt it was going to come sooner or a later. It was just a matter of time,” he said Wednesday afternoon. “But it’s part of a long list of exemptions, all of which have competing interests. I just wish it would have waited until next year, given the climate we’re in now.”
Some of the other specific exemptions included in the measure include those for citizens living abroad, gross income of insurance contracts, interest on qualified veterans’ mortgage bonds, merchant marine capital construction, film and television productions and coal production.
A companion Senate measure does not contain the credit union exemption specifically, Muniz said he has been told.
The House bill was referred to the Committee on Ways and Means, the House document said, “in addition to the Committees on Oversight and Government Reform, House Administration, Rules, and the Budget, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.”
The full text of the bill is available online.