A working group report on tax reform delivered to the the House Ways and Means Committee May 6 was overall good news for credit unions, but it included some recommendations to scrap the tax exemption, too.
On the one hand, the report from the working group on charitable/exempt organizations summarized the input it received to be overall in favor of retaining the credit union tax exemption.
And, the working group on financial services reported submissions it received suggest Congress should retain the tax-exempt status for credit unions. However, a list of groups submitting comments for the report did not include the Independent Community Bankers of America nor the American Bankers Association.
On the negative side, the report included recommendations to eliminate the credit union tax exemption from a May 2011 report from moderately liberal think tank Center for American Progress and the president’s Economic Recovery Advisory Board report of 2010, which also advocated for the elimination of the credit union tax exemption, was also included.
In a section that describes current tax law under scrutiny, the report also made an ominous statement about the credit union exemption, saying “while significant differences between the rules under which credit unions and banks operate have existed in the past, most of those differences have disappeared over time.”
Ways and Means Committee Chairman Dave Camp (R-Mich.) and Ranking Member Sander Levin (D-Mich.) said in a joint statement, “This document provides an important and comprehensive overview of the tax code, an overview of some of the most commonly referenced previous tax reform proposals and summarizes the views of more than 1,300 submissions offered to the Ways and Means Committee by key stakeholders. The committee will dig into its details over the coming weeks.” CUNA Executive Vice President of Governmental Affairs Ryan Donovan said upon first review, the report doesn’t appear to shed a lot of light as to what could be included in tax reform legislation.
However, Donovan said he’s heard from staffers in the Senate and the House that Congress may use tax reform as a bargaining chip in another debt ceiling increase that has to be hammered out by September. Republicans oppose an increase but are pushing for tax reform.
“It’s a political move, no doubt, but it gives them a bit of leverage in the process,” he said.
Donovan said the House Ways and Means Committee leadership has said it wants to pass a tax reform bill in the House by the end of July, which he said coincides with the timing the House would begin debt ceiling debate.
“They might even start later this month,” he said.
In a May 6 letter to Camp and Levin, NAFCU Vice President of Legislative Affairs Brad Thaler said the credit union tax exemption is a matter of survival.
“Despite what some claim, there remain significant regulatory and statutory differences between not-for-profit member-owned credit unions and other types of financial institutions–including limits on who they can serve and their ability to raise capital,” he said. “In other countries where the tax exemption has been eliminated, the number of credit unions has declined dramatically. If the tax exemption was removed, many could convert to banks or just go away.”