WASHINGTON—In a letter to Congressional leaders, CUNA Tuesday refuted claims by the American Bankers Association that the credit union tax exemption should be revoked if NCUA’s new FOM rules are passed.
The ABA and 53 state bankers associations wrote to the congressional taxation committees on Feb. 5 and urged them to “investigate the tax implications of the latest increase in powers” NCUA has proposed for credit unions.
The banker letter said that the “proposed changes should call into question whether the 82-year-old tax exemption is appropriate in the modern era,” calling for Congress to level the playing field between tax-paying banks and tax-exempt credit unions so that “all players can compete fairly and on an equal playing field in the financial services industry.”
CUNA President and CEO Jim Nussle wrote that “The bankers once again demonstrate a willful misunderstanding of how and why credit unions exist and operate. The basis for the credit union tax status is the structure of credit unions as not-for-profit financial cooperatives and their mission to promote thrift and provide access to credit for provident purposes. Even though the bankers would like you to believe otherwise, the tax status has never had anything to do with powers or restrictions of credit unions.”
Nussle stated that NCUA’s proposal is “clearly within the scope of the Federal Credit Union Act, which gives the NCUA board authority to promulgate implementing regulations. In our view, the proposal is not only well within the scope of the law but it does not go nearly as far as regulations which were on the books between 2003 and 2010, and as we outline in our comment letter on the proposal, we believe NCUA could go much further to facilitate consumer access to credit unions than they have. Furthermore, state-chartered credit unions continue to have more flexible field of membership rules under the various state credit union laws.”
Nussle concluded that “The bankers’ true motivation is the elimination of credit unions in the marketplace. If the federal tax status were reversed conventional wisdom suggests that many credit unions would convert charters and operate as banks…”