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More and more members of Congress are saying that size does indeed matter when considering the credit union tax-exemption argument. I believe CUNA is now working to manage member expectations about the inescapability of taxation. Large credit unions may not be able to escape being taxed, and CUNA knows it. Perhaps managing expectations will be an easy task when you consider 60% of those responding to the current Credit Union Times’ online voting poll (www.cutimes.com), believe credit union taxation will be a reality within five years. Huge government deficits creating a pressing need for new tax revenues, bold expansion efforts by some credit unions, and recent Congressional scrutiny of NCUA’s conduct toward the Texas conversions and its frequent visits to the court room are among the events triggering Congressional attention. Some believe a compromise taxation plan would both tax larger credit unions, and/or community chartered ones, and simultaneously trap them in the credit union charter. Why the trap? Because many credit union executives have publicly threatened that they would convert to a mutual savings institution charter if taxation becomes inevitable. Thus, CUNA’s defense would be to have a key element added to the compromise that would trap these credit unions in their restrictive credit union charter presumably to “protect” the NCUSIF from massive withdrawals. Afterward, credit union lobbyists would boldly acknowledge that taxation was inevitable, and expected by all; and in the next breath they would proclaim victory for “saving” the “credit union movement”, victory for the consumer, and victory for the low-income people that “depend” on credit union service. Credit union executives who challenged the anti-conversion amendment would be blamed for creating the taxation problem and branded as abandoning the credit union philosophy and greedy because of their desire to become a “bank”. The bank trade associations elated with finally getting some traction on taxation may be quick to agree to the trap, since it might help satisfy the desire of some to “contain” competitive credit unions. Should taxation become imminent, will your credit union be snared in a low-growth, restrictive charter, which many believe suffers from poor consumer awareness? If such a “trap” is not an element of the compromise, will taxation be like someone yelling “FIRE” in a crowded theater? Will the waiting room of the FDIC and the new mutual institution regulator be so jammed that it takes years to complete a conversion? Will FDIC become more selective about who it lets in once it has its plate full of applicants? Will your credit union qualify for tougher standards imposed to slow applications? Will the FDIC charge an entrance fee? Or, NCUSIF an exit fee, thus increasing the cost of conversion? If your credit union could benefit from secondary capital, will the financial markets support the conversion and an IPO years down the road as much as they do now? As Jack Welch, former CEO of GE and one of the most well-known change agents in modern times said, “Change is an absolutely critical part of business. You need to change, preferably before you have to.” Welch’s experience about resisters of change is also timely because he advises, “resisters only get more diehard and their followings more entrenched as time goes on. They are change killers; cut them off early.” Alan D Theriault President CU Financial Services Portland, Maine (Editor’s Note: CU Financial Services is a consulting firm that assists credit unions in converting to mutual savings banks.)

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