WASHINGTON — A final copy of a report from the U.S. Treasury Department still lists the credit union tax exemption as one that could be reconsidered if the United States were to reform its corporate tax structure.
The final version of the study updated a previous report on a late July meeting that the U.S. Treasury Department hosted with business leaders about the different approaches to reforming the corporate tax structure to make it more competitive in the 21st century. Part of the first version of the report discussed different tax exemptions, including the credit union tax exemption, and credit union associations expressed dismay at the time.
But the same or similar language persisted in the final report and its inclusion in the final version, when other examples of tax exemption had been dropped, drew a heated response from CUNA.
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"We understand that this report does not constitute a proposal by the Treasury Department to repeal the credit union tax exemption, but rather is designed to promote dialogue on the overall subject of corporate tax reform," wrote CUNA CEO Dan Mica in a Dec. 26 letter to U.S. Secretary of the Treasury Henry Paulson. "Nevertheless, the credit union tax exemption is of vital importance to credit unions and millions of Americans who use them to save and borrow at favorable rates and on consumer-friendly terms. The idea of changing the exemption should not be bandied about without careful thought and analysis, especially when other tax preferences have somehow been removed from the list."
Assistant Treasury Secretary Eric Solomon defended the tax reform discussion generally, while not addressing the specific credit union objections. "This report outlines several broad approaches to business tax reform," Solomon pointed out. "The study also outlines specific business tax areas that can be addressed. There are no policy recommendations in this study. We believe it will provide significant substance for discussion, and will further the effort to inform the public policy debate."
NAFCU expressed confidence that the report would not lead to any change in credit unions' tax status.
"While the credit union tax-exemption is still included in the report, we understand that this is not intended to be a recommendation for a policy change," stated NAFCU President Fred Becker, who acknowledged that the report says in several places that the Department did not intend to make any policy recommendations.
"Based on our personal meeting with Assistant Treasury Secretary Solomon last September and correspondence we have received from Deputy Assistant Secretary Carroll, we have been assured that the Treasury Department recognizes the important role credit unions play in our financial system and that Treasury is not proposing that the tax exemption for credit unions be repealed," said Becker.
Becker also noted that Carroll specifically stated in his letter "that Treasury includes the tax exemption in the report as a way of illustrating the difficulties of lowering the overall corporate tax rate and the many tough policy tradeoffs that would possibly have to accompany it." The treasury secretary affirmed that sentiment in his meeting with NAFCU, said Becker.
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