Trump Budget: CDFI Gone, CU Tax Exempt Status Examined
The Trump Administration’s comprehensive Fiscal 2018 budget, released Tuesday, again proposes eliminating the Community Development Financial Institutions program, and includes as a plan to make the CFPB subject to the annual appropriations process.
The budget also anticipates a restructuring of the regulatory regime for financial institutions and calls for a detailed examination of tax expenditures—a category that includes the credit union tax exemption.
The budget, totaling almost $4.1 trillion, would cut or eliminate many safety net programs, while significantly increasing defense spending and immigration enforcement.
The budget is a non-binding document that Congress may use as a guide for writing annual appropriations bills. The administration released some details of its budget earlier this year, but the new documents provide a more detailed look at the administration’s priorities.
The new budget has received an icy reception on Capitol Hill, with some members continuing the long-standing tradition of declaring the president’s budget “dead-on arrival.”
As it had earlier this year, the administration proposes eliminating all funding for new grants under the Community Development Financial Institutions program, which provides grants to certified banks and credit unions.
The budget includes $14 million to administer the program’s current programs.
Following the administration’s budget release earlier this year, Congress chose to increase CDFI funding by some $15 million, to $248 million.
Nonetheless, the administrations still proposes to kill the program.
The budget states that the program was created to expand the availability of credit, investment capital and financial services to low-income and underserved people and communities.
“Today, with nearly 1,100 Treasury-certified CDFIs, including loan funds, community development banks, credit unions, and venture capital funds active in all 50 states, that goal has been achieved,” the administration’s budget states.
The budget does not single out the credit union tax exemption, but states that the administration wants to eliminate most “special interest tax breaks” to make the tax code more equitable, more efficient, and to help pay for lower tax rates.
The administration is working toward examining the “objectives and effects of the wide range of tax expenditures in our budget, despite challenges related to data availability, measurement, and analysis,” according to the budget document.
That evaluation will include an examination of whether tax expenditures are achieving their goals “in an efficient manner,” without unintended consequences.
The administration estimated that the credit union tax exemption will cost the federal government $35.31 billion between 2017 and 2026.
Congress may try to enact comprehensive tax reform legislation this year and bankers again have proposed eliminating the credit union tax exemption.
The administration also anticipates significant budget savings from its examination of the financial institution regulatory regime.
The budget states that, “Since enactment of the Dodd-Frank Act, Treasury and the Federal financial and banking regulatory Agencies have expended substantial Government resources on generating hundreds of regulations that impose a significant burden on small businesses, stifle financial innovation, and curtail Americans' access to credit.”
Treasury Secretary Steven Mnuchin said that last week that his department will issue initial recommendations on how to change the Dodd-Frank law within the next two weeks.
At the same time, the House Financial Services Committee has approved legislation that would overhaul Dodd-Frank.
As part of the regulatory review, the administration states that it wants to restructure the CFPB, although the budget does not provide details of that review beyond making the agency subject to the annual appropriations process.
The House bill also would make the agency subject to appropriations.