Earlier this year, Hatch had questioned whether the credit union tax exemption is outdated, stating that credit unions essentially operate like banks. Hatch said the IRS had the power to require federal credit unions to file it on its own.

But Acting IRS Commissioner David Kautter, in a letter obtained by CU Times, remained noncommittal.

In a terse reply to Hatch, Kautter wrote, "I appreciate your thoughts on this issue." It continues, "We understand your concern in ensuring that federal credit unions promote the intended purposes and the need for greater transparency."

For his part, Hatch had little reaction to the IRS statement.

A spokesperson said Hatch "will continue to work with finance committee members on this issue and monitor oversight of credit union activity."

However, Hatch is retiring from the Senate at the end of this year and so far, no other member has publicly called for a reexamination of the tax exemption.

A credit union lobbyist said the IRS statement doesn't move the ball at all.

"The IRS response really doesn't say anything," John McKechnie, senior partner at Total Spectrum," said.

He added, however, that he would have hoped the IRS would have gone further, stating the IRS reaction was fine, but that he "would have much preferred a definitive statement from them along the lines that there is adequate transparency already. And that there is no policy justification for an additional regulatory burden. Those answers would've been ideal."

But Ryan Donovan, CUNA's chief advocacy officer, said he was pleased with the agency's response.

"We think the letter speaks for itself and we appreciate the IRS responding to Senator Hatch's concerns," he said. "We maintain that the existing policy is appropriate."

And NAFCU President/CEO B. Dan Berger said Hatch's plan would be unlikely to increase transparency in a material manner and would only serve to increase the regulatory burden imposed on credit unions.

The IRS will likely have to address the issue again. Last year's tax overhaul law contained a provision that will require not-for-profit organizations, including credit unions, to pay a 21% excise tax on renumeration that exceeds $1 million.

That could leave an opening for the IRS to require federal credit unions to file Form 990s, according to Dennis Dollar, principal partner at Dollar Associates.

"If you read between the lines of their letter to Senator Hatch, it was that any decision on requiring 990s for federal credit unions will be based upon statutory requirements imposed by the entire Congress' action on the tax law – not the pressure from one senator," Dollar, former chairman of the NCUA board, said. "If they eventually have to require 990s for enforcing the excise tax law, they don't want it to be viewed as caving to political pressure."

And banks and credit unions are already gearing up for a battle. Bankers and credit union officials are investing millions of dollars in the mid-term election, although in many cases the same lawmakers who support credit unions support banks as well.

CUNA recently unveiled a $100 million credit union awareness campaign, "Open Your Eyes to a Credit Union."

The ICBA immediately blasted the campaign, alleging that it was being financed through funds credit unions saved as a result of the tax exemption. They said credit unions operate on an unlevel playing field because they have the benefit of the federal income tax exemption.

"It is time for all of us to open our eyes to the misuse of our tax dollars by a rapidly expanding industry that profits from an unlevel playing field," ICBA President/CEO Rebeca Romero Rainey wrote in a blog post.

Credit unions quickly fired back.

And CUNA recently released a white paper that argues credit unions brought $15 billion in benefits to the economy in 2017. CUNA said the benefit greatly exceeds the cost of the tax exemption, estimated to be $2.9 billion in 2017.

"Imposing new taxes on credit unions would threaten the provision of the benefits they provide members and nonmembers," CUNA said. "Ultimately, it would mean trading off small gains in tax revenue for increased risk in credit unions and a reduction in consumers' financial choices."

Still, the bankers are ready to battle once again. "I think there is some support," Cole said. "This being an election year, some legislators don't want to get into this right now."