WASHINGTON–The Independent Community Bankers of America (ICBA) is calling for an “exit fee” to be paid any time a credit union buys a bank, saying it would offset the lost tax revenue.
In a letter to the Treasury Department, the ICBA said it wants an examination conducted of what it called “abuses of the tax code causing increased acquisitions of community banks by tax-exempt credit unions.”
The bankers’ trade group is also proposing legislation to offset the tax losses imposed by these transactions.
In its letter to Treasury Secretary Janet Yellen, the ICBA said its proposed “exit fee” would:
- Tax credit union acquisitions of taxpaying community banks to “capture the value of the tax revenue that is lost once the business activity of the acquired bank becomes tax-exempt.”
- Be equal to 10% of the gross value of the acquired bank’s assets or liabilities as shown on its most recent balance sheet, whichever are greater.
Not Congress’ Intent
“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 the communities they serve,” ICBA President and CEO Rebeca Romero Rainey said in a statement. “ICBA and the nation’s community banks call on the Treasury Department and Congress to address this abuse of the tax code and its impact on local lenders, banking industry consolidation, and reduced regulatory safeguards for low- and moderate-income consumers.”
In addition, the ICBA also alleges in its letter that:
- The “outdated tax code: has created large, rapid-growth credit unions that absorb most of the credit union tax subsidy
- Bank acquisitions “promote harmful consolidation and are the latest phase of the tax-exempt credit union industry’s aggressive growth”
- There is precedent for imposing an “exit fee” on credit unions removing a taxpayer from the tax base, such as excise taxes on political expenditures of 501(c)(3) tax-exempt organizations
Other Legislative Solutions
The ICBA is also proposing legislative “solutions” that include:
- Full and immediate tax parity between credit unions and banks
- Taxing the largest or most growth-oriented credit unions
- Taxing credit union commercial lending revenues
- Taxing credit union marketing expenditures that exceed a given threshold, such as multi-million-dollar stadium naming rights
- Allowing states to tax federal credit unions
- Raising regulatory scrutiny of credit union-bank acquisitions