WASHINGTON–A bank trade association said that with the number of credit union purchases of banks passing 100, it is “renewing” its call for “policymakers to examine the loophole contributing to these tax-subsidized acquisitions.”
The Independent Community Bankers of America (ICBA) said the recent acquisitions of $489 million-asset Citizens Bank of Florida by $4 billion-asset Fairwinds Credit Union in Orlando and then $93-million Tempo Bank by $1.6-billion Scott Credit Union in Illinois mark the 100th and 101st credit union acquisitions of community banks since 2003, more than one-fifth of which have come since 2019, according to the ICBA.
“Because every credit union purchase of a community bank diminishes tax revenues, each acquisition increases the cost of the credit union tax exemption, which costs taxpayers $2 billion per year and rising at the federal level alone,” the ICBA said in a statement.
‘Inflated Purchase Offers’
“Congress granted credit unions a tax exemption to serve people of modest means—not to subsidize their rapid growth at the expense of taxpaying community banks and local communities,” said ICBA President and CEO Rebeca Romero Rainey in a statement. “These transactions—facilitated by a tax exemption that allows credit unions to make inflated purchase offers well above the book value of the acquired banks—eliminate locally based lenders, further consolidate the banking industry, and cut regulatory safeguards for low- and moderate-income consumers due to credit unions’ exemption from Community Reinvestment Act oversight.”
Additional Demands
According to the ICBA, to “fully understand and address this concerning acquisition trend,” it is calling on policymakers to:
- Implement an “exit fee” on these acquisitions to capture the value of the tax revenue that is lost once the business activity of the acquired bank becomes tax-exempt.
- Hold congressional hearings to review how the credit union tax exemption fuels these transactions.
- Request a Government Accountability Office study on the evolution of the credit union industry and National Credit Union Administration supervision.
The ICBA has created a website dedicated to the credit union tax exemption at www.icba.org/wakeup.