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As if unrelenting attacks from banking industry lobbyists on the credit union not-for-profit tax-exemption in place since 1937 aren’t enough to keep credit union defenders constantly on their collective toes, Congressional lawmakers may be entering the fray through the back door. Of course I am talking about the current new credit union concern that Bill Thomas, Californian, Republican, and chairman of the powerful and influential House Ways and Means Committee, has followed through with an earlier threat to hold hearings on the nearly two million (and growing) n-f-p-s in this country. Initially he is singling out tax-exempt hospitals (brought about by some damaging publicity). But with urging from the banking industry, he more than hinted that credit unions could get a special turn under his committee’s microscope. From the instant the Thomas threat first surfaced, CUNA and NAFCU Washington staffs swung into action. They strategized. They made key contacts. They crystallized their defensive arguments. They wrote position papers. They requested the opportunity to be heard. They also diligently monitored the predictable sticking-their-noses-in credit union business actions by the banking industry lobbyists to influence the chairman and his committee members and the committee’s agenda. Count on bankers to never miss any opportune time to shine the spotlight on the credit union tax-exemption. Planting questions damaging to credit unions? That’s just for starters. The always-busy banking lobbyists are working overtime on this one, something they see as a golden opportunity to damage credit unions once and for all. After the first hearing, so far so good. All the legwork done by credit union interests and credit union friends kept credit unions on the back burner. But that can and probably will change, especially during the subcommittee phase of the proceedings. That means that credit unions as well as state leagues need to support what the national trade groups are doing and pitch in to help if and when asked. It really is a shame that the bankers can find so many ways to go after credit unions. This one is particularly galling. The banking lobbyists have had some success in making it appear that only credit unions are tax-exempt when in fact, as mentioned, the number and type of tax-exempt organizations is actually in the hundreds of thousands. The good news is that could turn out to mean that credit unions could find lots of allies in this particular fight. It is safe to assume that no tax-exempt organization is ready to surrender its not-for-profit status based on something the House and Ways committee generates. Thus, credit unions need to round up potential allies starting with the American Society of Association Executives (ASAE), a large, powerful Washington; D. C. based group that represents thousands of tax-exempt, not-for-profit organizations. To use the old clich, ASAE definitely has a dog in this fight. The threat to all n-f-ps should be clear. Once the ball starts rolling, besides credit unions, is any 501 (C) (the IRS designation) group safe? Probably not. It is not a stretch for the committee’s momentum to go way beyond credit unions and bring into question why any of the current 1.8 million tax-exempt organizations should be tax-exempt. Think about it. Why should the American Bankers Association (ABA) and all the other dozens of state, regional, and national banking groups, to use just one of many available examples, be tax-exempt? How was it ever justified? How is it justified today after these organizations have made so many radical changes over the years? If the ABAs of this world look like they are going to end up the year with a bottom line that some might consider too fat, they know what to do. Spend the money quickly. Take the board on an all-expense trip for a planning retreat allowing, of course, some stress-relieving time on the golf course and in a deep sea fishing boat. Give the CEO a big bonus. Increase staff perks and benefits. Order new furniture. Start a new educational outreach initiative. Launch a new headquarters-remodeling project. You get the idea. Maybe Thomas’ focus ought to be on the IRS and its some times questionable rationale and inconsistency in granting tax-exemptions? Looking at the much bigger than credit unions picture, Thomas and his committee may just be opening up a giant Pandora’s Box involving all not-for-profit, tax-exempt organizations? Wouldn’t it be interesting to see if thousands of them have “strayed from their original purposes” and who if anyone is making such an accusation? Come to think about it, maybe it is precisely this type of thing that has piqued Bill Tomas’ sudden keen interest in not-for-profits. This and the original target, tax-exempt hospitals that are supposed to have special obligations to those of modest means, but apparently, according to examples cited by Thomas, seem to have on occasion forgotten about that. From just this bit of insight it becomes clear why banking industry lobbyists keep hammering on such words as “original purpose,” “serving the underserved,” “people of modest means,” etc. isn’t it? All of which means that the credit union industry lobbyists need to make sure Thomas and his committee know why credit unions were originally classified as not-for-profit, tax-exempt organizations and why the reasons hold true just as much today as they did in the mid 1930′s. But it also means that credit unions can’t just play defense as they usually do when attacked. Some of the CU quotes defending credit unions that surfaced around the hearing were pretty lame. Credit unions need to show that they are but a miniscule portion, number wise and dollar wise, of the broad based tax-exempt and not-for-profit sector. Like NAFCU did in its letter to the committee which pointed out that credit unions represent a mere one-half of one percent of all federal income tax-exempt organizations. Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail [email protected]

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Peter Westerman

Credit Union Times

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