NAFCU Defends Tax Exemption to President's Panel; Says Exemption Good for All Consumers, Not Just Members

ARLINGTON, Va.-The credit union tax exemption is good for anyone with a relationship with a depository institution, NAFCU told the President’s Advisory Panel on Federal Tax Reform. NAFCU President and CEO Fred Becker recently submitted comments to the panel defending the credit union tax exemption from comments submitted earlier by the American Bankers Association and America’s Community Bankers. CUNA had also previously commented to the panel, but neither credit union group made it in before the panel’s previous deadline for public comment. Becker emphasized that credit unions’ tax-exempt status is “not just for credit unions but for all who have savings in any regulated depository institutions,” and wrote “to urge the panel to support continuation of the federal income tax exemption for all credit unions in any recommendations you might make. Credit union critics have erroneously claimed that some credit unions today are no different than banks and thus should forfeit their tax exempt status.” Becker also noted the previous support of the president on numerous occasions for maintaining the tax exemption, as well as consumer advocates who say the benefits of credit unions far outweigh the cost of the tax exemption. “Furthermore, even bankers have admitted that credit unions’ influence in the market has led them to better serve their customers,” Becker wrote. He cited an American Banker article that reported Zions Bancorp of Salt Lake City, Utah was forced by local credit unions and other competitors to up its money market rates and the bank still made a record profit that quarter. Becker explained that taxation would change basic fundamentals of credit union operations to the detriment of consumers, including higher loan rates, lower savings rates, and more and higher fees. It would impair credit unions’ ability to build up reserves, which they can only do through retained earnings, and raise net worth concerns. “As a result, a very unfortunate consequence could be a shift in orientation to profit-motivated interests, instead of providing low-cost financial services to member owners.” Becker concluded that there “is more than ample justification for continuing the federal income tax exemption for all (Becker’s emphasis) credit unions” and the tax panel should support the tax-exempt status of credit unions. -