In a letter to the House Ways and Means CommitteeChairman, American Bankers Association President/CEO Rob Nichols (pictured) took aim at credit unions' taxstatus.

In the letter to Rep. Kevin Brady (R-Texas), Nichols said creditunions have outgrown the need for the tax exemption they havereceived since the Great Depression. The Ways and Means Committeeheld a hearing to examine the tax code April 14.

Using today's tax filing deadline for millions of Americans as aspringboard, he said the Government Accountability Office noted thehistorical distinction between banks and credit unions hascontinued to blur.

“Lax credit union regulators have allowed credit unions toexpand their membership, business lending and complexity ofoperations, causing the cost of the tax subsidy to explode,” hesaid.

The cost of the credit union tax exemption is nearly $27billion, he added, citing the Treasury Department. Additionally, hesaid the Prochnow Foundation reported 61% of the consumer benefitsgo to households with incomes totaling more than $95,000.

He further explained that a very small portion of the taxexemption benefits are passed to the consumers. According to astudy from the non-partisan Tax Foundations, most of the taxbenefit was retained by the credit unions themselves by payinghigher salaries or increasing the size of the credit union, hesaid.

“The status quo is unacceptable,” Nichols said. “On this day,when individuals and businesses will settle up with the governmentfor nearly $2 trillion in federal income taxes, it is simply notfair that the entire credit union industry pays nothing. The publicpolicy justification disappeared long ago and taxpayers should nolonger subsidize these large aggressive credit unions.”

He urged the chairman not to let the status quo stop thecommittee from ending the outdated tax exemption and added a repealof the tax exemption would be a fiscally sound way to reduce theU.S. debt.

In response, NAFCU President/CEO Dan Berger countered Nichols'statements in his own letter to the House Ways and MeansCommittee.

“What the bankers do not tell you is that nearly one-third ofbanks are Subchapter S corporations and pay no corporate incometax,” Berger said. “If credit unions have such an extraordinaryadvantage, why aren't banks lining up to convert to creditunions?”