WASHINGTON–CUNA has sent a letter ahead of the House Ways and Means Committee hearing on the 2017 tax law that seeks to emphasize what credit unions have a federal tax exemption.
In its letter, CUNA stresses credit unions are exempt from federal income tax due to their structure as not-for-profit financial cooperatives and their mission to provide significant financial benefits to their members.
Credit union members benefit by $12 billion a year as a result of paying fewer and lower fees, lower loan rates and earning higher rates on deposits, CUNA told Congress.
The trade group reminded that the Tax Cuts and Jobs Act of 2017 (TCJA) recognizes the federal income tax status of credit unions. “By not altering the credit union federal income tax status, Congress demonstrated its long-held belief in the credit union model and structure,” CUNA said. “However, the TCJA imposes a 21% excise tax on certain executive compensation provided by tax-exempt organizations.”
Other Concerns
CUNA said it and other not-for-profit employers are concerned about the lack of parity between existing for-profit and not-for-profit employee contracts regarding the not-for-profit excise tax and the deductibility of corporate executive compensation.
“CUNA urges Congress to pass legislation to ensure parity in this area between the for-profit and not-for-profit sectors,” the trade group said, adding, “The new tax law also imposes the unrelated business income tax (UBIT) on certain fringe benefits provided by not-for-profit employers. This provision basically taxes an expenditure made by an employer, not sales or other revenue-generating activity. CUNA has lobbied Congress to repeal this tax or at least delay its implementation until the Internal Revenue Service issues guidance that provides more clarity.”
The full letter can be read here.