WASHINGTON–The nation’s banking industry is expressing its support for a call by Sen. Orrin Hatch that FCUs demonstrate to the IRS how they are fulfilling their missions and why they continue to deserve a tax exemption, while claiming a letter by NCUA Chairman J. Mark McWatters is evidence credit unions are a “risk” without “taxpayer subsidies.”
One bankers’ group also claimed “credit unions wouldn’t be in this position” if they weren’t spending money on stadium naming rights deals and “exorbitant” executive compensation.
The Independent Community Bankers of America® (ICBA) said it supports the call by Senate Finance Chairman Hatch (R-UT) for large federal credit unions to report financial information that would require they essentially demonstrate they deserve the federal tax exemption.
The ICBA also was critical of McWatters’ letter to Hatch in which he responded to questions raised by the senator related to the tax exemption. The ICBA said McWatters “admitted” in the letter “that the tax-exempt industry’s fund insuring credit union deposits would be at risk without taxpayer subsidies.”
“ICBA and the nation’s nearly 5,700 community banks strongly support Chairman Hatch’s call for the IRS to consider requiring large credit unions to file Form 990s like other tax-exempt institutions,” ICBA President and CEO Camden R. Fine said in a statement. “As these financial firms grow and receive new powers from the NCUA, Congress should examine whether their multibillion tax exemption is still warranted. Chairman McWatters’ admission that the credit union industry’s insurance fund is underwritten by American taxpayers only underscores the need to review and ultimately abolish this taxpayer handout.”
The ICBA’s Fine went on to say that McWatters’ statement that elimination of the tax exemption would raise safety and soundness issues “raises questions about the management of the fund and concerns about the growth of the credit union industry.”
The ICBA said it and the nation’s community banks will continue working to raise awareness of the credit union industry’s federal tax subsidy and the NCUA’s attempts to “drastically increase the powers of these tax-exempt financial firms beyond their statutory limits.”
American Bankers Association Argues 'Red Herring'
Meanwhile, the American Bankers Association has also blasted the McWatters’ response to Hatch, and pointed to statistics included in McWatters’ letter that NCUA has denied or deferred less than 10% of FOM expansion requests since new rules were put into place in 2015.
Regarding the statements by McWatters that elimination of the tax exemption “would almost certainly have a detrimental effect on the credit union system and increase losses to the Share Insurance Fund, which could ultimately fall to U.S. taxpayers,” American Bankers Association spokesperson Jeff Sigmund dismissed these concerns as a “red herring from the other issues Hatch had raised in his letter.”
“No one wants to eliminate the federal tax exemption for all credit unions — just for the 5% of institutions that enjoy 75 percent of the tax exemption,” said Sigmund. “The fact that NCUA claims that credit unions would need a taxpayer bailout without the tax exemption is extremely troubling and raises more questions than it answers. Maybe if they spent less on stadium naming rights deals and exorbitant executive compensation packages they wouldn’t be in this situation.”