WASHINGTON-Responding to attacks by the American BankersAssociation and America's Community Bankers, CUNA has filed aresponse with the President's Advisory Panel on Federal Tax Reform.CUNA's written remarks stated that the credit union tax exemptionis "sound public policy and urges the Advisory Panel to reaffirmthis conclusion." Expanding fields of membership and services aresome of the reasons the bankers stated for revoking credit unions'tax-exempt status. According to CUNA, "Since inception, creditunions' tax exemption has had absolutely nothing to do with eitherfield of membership restrictions or the extent to which creditunion service offerings were limited. Rather, the original reasonsfor the tax exemption have had everything to do with thecooperative structure of credit unions." The credit union tradeassociation continued, "Today, credit unions continue to operate asdemocratically controlled mutual institutions, serving theirmembers on a non-profit basis. Rather than distributing net incomeamong stockholders (as do banks), the bulk of it is returned tomembers in lower loan rates and fees, or higher yields on savings."CUNA pointed out that Congress reaffirmed credit unions' taxtreatment in the findings to the Credit Union Membership AccessAct. Additionally, credit unions continue to serve those of modestmeans. CUNA cited a recent Filene Research Institute report, whichfound that `bank only' households had higher income levels than`credit union only' households, and that households that`primarily' use a bank have higher median incomes than those`primarily' using credit unions. One of the values of credit unionsis their pricing of services. "Numerous studies and reports showthat credit unions charge fewer and lower fees than do banks forthe same kinds of services," CUNA wrote. For example, credit unionminimum balances to avoid fees are typically lower than at banksand credit unions typically offer lower rates on loans, especiallyon used cars and small loans. Nearly half of credit union businessloans (45%) go to borrowers with household incomes below $50,000,according to Treasury, and Home Mortgage Disclosure Act data showsthat low-income and minority applicants are "significantly morelikely" to get approved by a credit union than any other lender."Throughout most of their history, credit unions have actually beenhamstrung in their efforts to serve members of modest means becausefield of membership rules generally restricted eligibility tooccupational groups," CUNA pointed out. Now, through NCUA's AccessAcross America, credit unions have been able to expand their reachto over 92 million potential members in underserved areas. Creditunions that have taken that path have experienced membership growthover three times that of other credit unions (17.4% vs. 5.2% overthe three year period), CUNA stated. CUNA has estimated that creditunion members save more than $6 billion a year by bringing theirbusiness to a credit union. "That is about four times the roughly$1.5 billion that credit unions would pay in federal income tax,"CUNA's comments highlighted. And the tax exemption encouragescredit unions to remain with the charter. In rebuttal to bankers'complaints that large credit unions should be taxed because theycompete with for-profit institutions, CUNA said, size does and doesnot matter; it does not matter because even the largest creditunion is democratically controlled and not-for-profit, but it doesmatter because larger credit unions are better able to providecertain services, including to those of modest means. "There is norelation between the size of an institution and the absence orpresence of reasons to justify the tax exemption," CUNA wrote."Large credit unions are democratically controlled, not-for-profitcooperatives in every way that smaller credit unions are.A largecredit union may be more likely to offer a broader array ofservices, and to be a greater presence in a local market. Butneither activity makes it less a cooperative than a smaller creditunion. No one suggests that as soon as the congregation of achurch, synagogue or mosque exceeds a certain size, it should nolonger be tax exempt." Additionally, the size and efficiency oflarge credit unions often permits them to offer lower rates andfees and make more programs available for low- to moderate-incomehouseholds. Finally, CUNA argued, there is no evidence of marketdisruptions due to the credit union tax exemption. The grouppointed out that banks posted record profits for the fourth yearrunning, according to the Federal Deposit Insurance Corporation.Banks' aggregate return on assets has averaged 1.23% over the past12 years. "And credit unions are only growing marginally fasterthan banks," CUNA said. "In the decade ending in 2004, totalbanking institution assets grew at a compound annual rate of 7.25%compared to 8.4% for credit unions. Credit unions now account for6.2% of the combined assets of all depository institutions. At thegrowth rates of the past decade, it will take until the year 2053for the credit union share to climb to just 10%."[email protected]