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David Morrison’s article, “Should the Earnings of Credit Unions That Convert to Banks be Taxed”, (CU Times May 24, 2006) was a great survey of the issue. As a long-time CU board member and volunteer (Navy Federal) and as a retired CEO of a charity (501 (c) 3), I have found the difference between the two not-for-profit models a wonderful education.

I have taken a lot from each. I am fascinated that there are no rules about what to do with the remaining capital or retained earnings when a credit union goes out of business. There is nothing in my credit union’s bylaws. I checked. With a charity, it is clear. Remaining assets go on to another charitable purpose. The IRS says so. In the credit union case, I guess you could tax what’s left. I guess you could also figure out a way to give the capital back to the people that created it. I like that better than taxation. I also don’t like the idea that my money might go to enrich a bunch of self-serving board members and executives. I agree with Jim Blaine who calls it stealing.

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