Steven R. Bisker, attorney at law with 32 years of experience including at NCUA, said of the bill's substance, "It's an embarrassment. I would be embarrassed if I were the senator and my staff passed that up to me because they didn't do their due diligence." He pointed to the exact language of the Federal Credit Union Act, which reads, "The Federal credit unions organized hereunder, their property, their franchises, capital, reserves, surpluses, and other funds, and their income shall be exempt from all taxation now or hereafter imposed by the United States or by any State, Territorial, or local taxing authority; except that any real property and any tangible personal property of such Federal credit unions shall be subject to Federal, State, Territorial, and local taxation to the same extent as other similar property is taxed." Pre-Emption Power?

NCUA Vice Chairman Rodney Hood was in New York recently addressing the 90th Annual Meeting of Municipal Credit Union in New York City and vigorously backed the federal credit union tax-exemption. During his speech he told the group, "The tax exempt status of credit unions must remain in tact so that America's underserved consumers can have continued access to the tools they need to open doors–doors to the automobiles that drive them to work and doors to the homes that provide shelter for their families."

Hood highlighted how Municipal and credit unions across the state are earning their tax-exempt status everyday. He noted that credit unions in New York State granted over $195 million in affordable mortgages. Hood added that "were it not for their tax-exempt status" these credit unions might not have had as broad an impact as they do. The vice chairman also noted that 90 years ago, Municipal was founded to combat the predatory lenders of that time: loan sharks. Municipal is "still filling that niche," he told Credit Union Times in a follow up interview, only now it is payday and other unscrupulous lenders. "I mentioned that there are those who want to take that away and why would you do that when they are demonstrating the wonderful results they are today," Hood said. He added that he was impressed that the approximately 1,000 attendees of the event were well aware of the state legislative attempt. "NAFCU strongly agrees with Vice Chairman Rodney Hood that the NCUA has the federal pre-emption authority over an attempt by a New York state senator to tax federal credit unions, and we recommend the agency immediately exercise that authority in the unlikely event the tax bill passes," NAFCU President/CEO Fred Becker stated. "We applaud Mr. Hood and the agency for protecting and enhancing the federal charter." While Hood expressing his personal view could be politically helpful, it is not necessary. According to Bisker, the matter is open and shut due to strict statutory construction. "It's Congress saying specifically that you can't tax federal credit unions except with respect to real property," the attorney emphasized.

Powers from Senator Morahan's office commented, "The fact they may be exempt, we'll take that under advisement." He added that he had heard that from a number of sources.

Even if the issue is settled in a legal sense, there are still political implications when the tax-exempt status of federal credit unions is challenged given the bankers' penchant for attacking it. "I think they didn't realize what a can of worms they stepped into," Kramer commented upon meeting with the senator's staff afterward and explaining the enormity of the issue to all credit unions. "The Senator was ready to continue the dialogue himself more personally." The league is sharing a template letter for credit unions to send in to Morahan and encouraging calls to his office. Kramer pointed out that the NYSCUL's state lobbying day is May 21 and credit unions will be visiting with Morahan as well as their own senators and assemblymen. However, this bill is bigger than New York, American Association of Credit Union Leagues Executive Director Susan Newton, also CUNA senior vice president of league services, said. "It's very interesting that the approach is going after the federal pre-emption from the state," she noted. She said the only other somewhat similar instance she could think of off-hand was when the Utah state legislature passed a resolution up to the U.S. Congress that recommended taxation. The Utah attempt did not get anywhere. Newton said she was confident the league was taking care of business in their state and the case for federal pre-emption is solid. However, she observed, "You never ever take anything for granted because these state legislators talk to each other at meetings." Credit unions need to stop the idea from spreading to other states, which is why CUNA and ACCUL maintain relationships with the National Conference of State Legislatures, the National Governors Association, the American Legislative Exchange Council, and others. New York State league President/CEO William Mellin agreed, "Credit unions cannot afford to sit back and let the bankers tell their story and influence their legislators. Last year it was CRA, this year taxation. The bankers have put a target on the back of all credit unions and only by flexing our grassroots muscle and taking it to the next level can credit unions hope to wipe it off."

"We're going to work with him and continue to educate him…" Kramer said. "I think we'll be successful in holding the bill." –[email protected]