Thousands of credit union representatives came to Washington last week to rally Congress to preserve a long-standing tax exemption for credit unions.
They got their wish — at least for now.
On Wednesday afternoon, Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, introduced a new corporate tax reform plan.
The proposal, which would raise taxes for the largest banks, exempts credit unions from paying federal taxes as long as they are nonprofit entities. If passed, the measure would go into effect Jan. 1.
“Our top issue has been preserving the credit union tax exemptions, which have been in place since 1917,” said Bill Cheney, president and chief executive of the Credit Union National Association. “This is not some new-fangled, late-breaking tax loophole. This has been around a very long time.”
Banks are not pleased.
“We find it disgraceful that while a new tax is being proposed for banks, today’s proposal ignores a $1 trillion credit union industry that pays no taxes at all, costing the U.S. Treasury $2 billion annually,” Frank Keating, president and chief executive of the American Bankers Association, said in a statement. “It’s time for this indefensible tax-exempt status to come to an end.”
Hours before the proposal was introduced, various members of Congress, including Steny H. Hoyer (D-Md.), addressed a crowd of credit union representatives at the Walter E. Washington Convention Center.
“Credit unions aren’t banks, and it doesn’t make sense to tax them like they are,” said Rep. Derek Kilmer, (D-Wash.).
Rep. Shelley Moore Capito (R-W.Va.) agreed: “Credit unions need a great deal of regulatory flexibility to meet the needs of their members,” she said. “One-size-fits-all Washington regulations simply don’t work.”
Roughly 4,400 credit union representatives attended the annual Governmental Affairs Conference organized by the credit union association. The yearly rendezvous serves as an opportunity for the small institutions to voice their concerns to Congress. In addition to the tax exemption, many of this year’s discussions focused on protecting credit unions from expenses related to retail security breaches.
“The Target breach is still top of mind for a lot of our members,” Cheney said. “The vast majority of the fraudulent costs — the cost of reissuing credit cards and answering members’ questions — are covered by credit unions and banks.”
There were also concerns about pending legislation that would require credit unions to raise supplemental forms of capital, as well as discussions about increased regulation and new mortgage lending guidelines.
“With our tax exemption preserved, step one is complete,” he said. “But we have to continue to campaign aggressively going forward.”