Trades Hunker Down on Tax Exemption
NAFCU and CUNA are continuing their efforts to protect the credit union tax exemption in 2015 in anticipation of tax reform in the New Year.
Members of Congress and the White House have signaled that tax reform could move forward this year and the credit union trade groups have vowed to remain vigilant in defending credit union tax status.
“We now have Chairman [Orrin] Hatch (R-Utah) and Chairman [Paul] Ryan (R-Wis.) in charge and they have indicated they want tax reform. It’s unclear what tax reform will look like but anytime there’s a tax reform debate, we think it’s important to remain vigilant and protect the credit union interest,” Brad Thaler, NAFCU vice president of legislative affairs, said.
“We’ve already been talking with them and their staffs and they have a history of supporting the credit union tax exemption. We don’t expect that to change but we’re going to remain vigilant in the process,” he added.
In December, President Obama said there would be some conversations between both sides about tax reform principles at the staff levels in the weeks leading up to his State of the Union address.
“I think an all Democratic Congress would have provided an even better opportunity for tax reform but I think talking to Speaker [John] Boehner (R-Ohio) and Leader [Mitch] McConnell (R-Ky.) that they are serious about wanting to get some things done. The tax area is one area where we can get things done,” Obama said at an end of the year press conference.
CUNA Chief Advocacy Officer Ryan Donovan told CU Times CUNA would stay engaged in tax reform discussions to preserve credit unions’ tax-exempt status. The trade group would like to see the new Congress remove barriers that keep credit unions from fully serving their members, he noted.
A Federal Housing Financing Agency proposal that requires Federal Home Loan Bank members to keep 10% of their assets in residential mortgages is among the areas CUNA is focused on this year.
“That hasn’t been a requirement to do that on an ongoing basis and it identified that, under the law, banks under $1 billion in assets are exempt from that requirement but the same treatment is not given to credit unions under the law so we plan to ask Congress to address that under the umbrella of removing barriers,” Donovan said.
CUNA would keep pushing for adjustments to the Consumer Financial Protection Bureau qualified mortgage rule, which would involve re-introducing the Mortgage Choice Act, according to Donovan. If passed and signed into law, the legislation would adjust the calculation of points and fees under the qualified mortgage rule.
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Both CUNA and NAFCU are also planning to encourage Congress to enact cybersecurity legislation that holds retailers to the same standards as financial institutions.
“We’ll be working with members of Congress to develop legislation that ensures that merchants follow the same security standards that credit unions and other financial institutions have to follow and make sure that there’s a process that expedites reimbursement to credit unions when merchants suffer data breaches,” Donovan said.
NAFCU President/CEO Dan Berger said there is no comprehensive regulatory structure similar to the Gramm-Leach-Bliley Act that covers retailers, merchants and others who collect and hold sensitive information.
“NAFCU strongly supports the passage of legislation requiring any entity responsible for the storage of consumer data to meet standards similar to those imposed on financial institutions under the Gramm-Leach-Bliley Act,” Berger said in a letter to congressional leaders Jan. 6.
Donovan said any cybersecurity legislation should also ensure that a credit union is able to tell members where a breach occurred.
The credit union trade groups also want Congress to raise the 12.25% member business lending cap in 2015.
“Credit unions have a 12.25% asset cap on their business lending, with loans of only $50,000 or less exempt from this cap. Passed in 1998, these arbitrary thresholds are severely outdated and have not increased to account for inflation and economic fluctuations,” Berger wrote in his letter.
“NAFCU asks that Congress increase the de minimis exclusion to exempt additional loans and consider exemptions for veterans applying for small business loans. We also believe it is imperative that Congress increase the arbitrary 12.25% cap to help ensure that small business owners have as many resources as possible to access credit,” he added.
NAFCU also identified patent reform among its list of legislative priorities for 2015. President Obama mentioned the need to pass patent reform in his 2014 State of the Union address.
“A growing number of credit unions are reporting receipt of demand letters from law firms representing patent assertion entities, claiming patent infringement, with the option to settle or face litigation,” Berger said. “These deceptive letters are confusing and misleading as they often allege that the use of everyday technology violates the patent holders’ rights.”
Berger noted that the cost of litigation is typically more expensive than paying a settlement amount.
“‘Patent trolls’ use the threat of litigation as leverage to extract payment from the recipient business who settles in lieu of running the risk of a complex and lengthy legal battle,” Berger said.
Donovan said credit unions often have to pay unnecessary licensing agreements rather than risk litigation.
“Patent trolls cause a deadweight cost of legal fees and licensing agreements that is ultimately born by credit union members. We have been actively engaged on this is issue with leaders on Capitol Hill, and we continue to urge Congress to enact a legislative remedy,” he said.