WASHINGTON–The Independent Community Bankers of America is calling on Senate Finance Committee Chairman Orrin Hatch (R-UT) to convene a hearing on the credit union tax exemption.
The request by the ICBA follows in the wake of dueling letters from banking groups and credit union associations over the tax exemption. As CUToday.info reported, 52 state bankers’ associations have sent a letter to Hatch arguing taxpayers should no longer “subsidize” the nation’s largest credit unions. CUNA and NAFCU responded with a joint letter of their own calling the bank letter the “height of arrogance."
In its letter, the ICBA says “modern credit unions have failed in every aspect of their public mission and pose a threat to the American tax base.”
“Today’s credit unions are virtually indistinguishable from taxpaying community and regional banks,” ICBA President and CEO Camden R. Fine wrote. “It is widely understood but rarely acknowledged that the tax exemption has outlived its purpose. Now is the time to have that discussion.”
The ICBA noted its request for a congressional hearing follows a letter from Hatch to NCUA Chairman J. Mark McWatters questioning the tax exemption.
“I am concerned that the credit union industry is evolving in ways that take many credit unions further from their original tax-exempt purpose,” Hatch wrote in the letter, citing NCUA’s moves in recent years to relax field-of-membership constraints, to consider alternative capital use and to permit expanded business lending. “While these may be worthwhile pursuits, they should give us pause and cause a reflection on the core mission of credit unions and their tax-exempt purpose.”
The ICBA argues in the letter that the tax exemption is valued at approximately $2.9 billion this year. It also claims several NCUA actions that have helped the tax-exempt industry stray from its mission to serve people of modest means with a “common bond,” including rules relaxing field-of-membership constraints, lifting commercial lending limits, and opening the door to the use of outside investor capital.
ICBA said it and the nation’s community banks are united in their opposition to the credit union industry’s “unwarranted federal tax subsidy as well as the NCUA’s attempts to drastically increase the powers of tax-exempt credit unions beyond their statutory limits.”