WASHINGTON-As one Virginia congressman put it, credit unionscame closer than ever to taxation this year. In the most public ofarenas to date, the tax-exempt status of credit unions was calledinto question during a hearing slated by House Ways and MeansCommittee Chairman Bill Thomas (R-Calif.). It was clear that mostmembers of the panel were not looking to repeal credit unions'tax-exemption. But, what many were looking for was evidence of howcredit unions are fulfilling their mission to serve people ofmodest means in order to earn their tax-exempt status. The creditunion and banking representatives at the hearing came awayrepeating Thomas' exact words: “transparency, accountability, andverifiability.” Though he said he was not ready to impose a federalincome tax on credit unions, he questioned why NCUA would resistcollecting CEO salary information and encouraged some type ofreporting to demonstrate service to people of modest means. ThoughNCUA Chairman JoAnn Johnson assured the committee chairman that thetaxpayers were “getting their money's worth,” Thomas said herassurances were not good enough; some type of documentation isnecessary. Johnson later said, “While we know credit unions areserving folks from all walks of life and are extending service tothose in underserved areas, I believe credit unions need to do abetter job in telling their story. Credit unions have a great storyto tell, they just need to make sure their message is being heard.”She has since asked NCUA's task force, charged with figuring outhow to document credit unions' work without overly burdening them,to look into the committee's concerns. Johnson said she wants thetaskforce to think outside the box in analyzing 5300 Call Reportdata to see what might be gleaned from that reporting mechanismalready in place. NCUA plans to announce the results some time nextyear. Though credit unions were able to justify their tax-exemptionto Congress in the H.R. 1151 battle and avoid documentationattempts by former NCUA Chairmen Norm D'Amours and Yolanda Wheat,this time around even the major credit union trade associationchiefs are wondering what may be in the hopper for credit unions onthe documentation front. D'Amours made yet another appearance onthe credit union scene at the hearing. Though he said he did notadvocate taxing credit unions, he did strongly support-as he alwayshas-CRA-like requirements for them. Of course the banking communityjumped on the documentation issue as well. America's CommunityBankers CEO Diane Casey-Landry stated, “I think CRA, especially forthe larger credit unions, is really inevitable.” In follow upcomments to the committee, ACB proposed two pieces of legislation,one of which would require credit unions to obtain 75% of theirdeposits from low-income people to maintain their tax-exemption andanother to disclose credit union CEOs' salaries by requiring creditunions to file form 990s with the IRS. The credit union systemseems uneasy with disclosing credit union chiefs' pay. At thehearing, Johnson pointed out that the CEO's pay is set by thevolunteer board of directors elected from the membership and citeda study that showed credit union CEOs salary to be 57% of theirbanking counterparts. American Bankers Association Senior EconomistKeith Leggett said that the hearing made clear that thetax-exemption is a privilege but that his organization still hasmore educating to do with the credit union-friendly members of thecommittee. ABA, ACB and the Independent Community Bankers ofAmerica were invited to testify at the hearing and made the usualcomments about credit unions' size and breadth of services,including business lending, as part of the reason why credit unionsno longer merit their tax-exempt status. Though both sides claimedpartial victories following the Ways and Means Committee hearing,in comparison with “a last minute tax package,” CUNA President andCEO Dan Mica considered the hearing “a total victory.”[email protected]

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