WASHINGTON–Three pieces of legislation have been introduced in Congress that, if enacted, would have a bearing on credit unions, including legislation related to an exemption for member business loans in both the House and Senate. Separately, the Defense Credit Union Council has expressed its support for NCUA's decision last week related to service members and qualifying for CDFI status.
In Congress, two of the pieces of legislation are actually companion bills. In the House, Rep. Brad Sherman (D-CA) has introduced a bill that would exempt credit union loans made during the declared COVID-19 disaster from the member business lending cap of 12.25% of assets until one year after the end of the COVID-19 emergency declaration.
The legislation has CUNA’s support.
“Businesses and communities around the country are facing economic hardships that haven’t been seen in generations, and this bill will help credit unions deploy much needed capital to those businesses,” said CUNA CEO Jim Nussle. “Credit unions have served as financial first responders since the onset of the pandemic and will be vital to the nation’s recovery efforts. This bill will bolster those efforts going forward.”
The House is expected to return to session this week to continue work on the next phase of so-called phase IV stimulus legislation. Credit unions have called for an MBL exemption to be included in the package.
In addition to Sherman, other co-sponsors on the bill include Don Young (R-AK), Brian Fitzpatrick (R-PA), Maxine Waters (D-CA), Suzanne Bonamici (D-OR), Vicente Gonzalez (D-TX), Eleanor Holmes Norton (D-DC), Joe Neguse (D-CO), J. Luis Correa (D-CA), Alan Lowenthal (D-CA), Jeff Van Drew (R-NJ) and David Trone (D-MD).
MBL Bill in Senate
Separately, in the Senate, Sen. Ron Wyden (D-OR) announced he plans to introduce legislation this week called the “Credit for Small Businesses Impacted by the COVID–19 Crisis Act” that would also provide an exemption for credit unions. Wyden’s bill is the companion bill to the legislation in the House.
"Our banking system has left the mom and pop shops on Main Street behind during this crisis. These small businesses are desperate for relief. They want to pay their employees, and they want to pay their bills so that when it's safe they can reopen their doors. They shouldn't be denied relief because they don't have an account at a big bank," Wyden said in a statement. "Congress needs to do more to help community lenders better serve our small businesses as they weather this storm. The next COVID stimulus package must include this help for credit unions."
The Access to Credit for Small Businesses Impacted by the COVID–19 Crisis Act would provide a one-year exemption to the 12.25% member business lending cap for loans made by credit unions.
‘Ready to Answer the Call’
“The Northwest Credit Union Association strongly supports the legislation introduced by Sen. Wyden. This legislation will allow credit unions to continue helping small businesses to open, grow, and survive these challenging times,” said Jennifer Wagner, EVP and chief advocacy officer with the Northwest Credit Union Association. “Small businesses need credit unions, and we stand ready to answer their call. Now more than ever is the time to empower credit unions to serve more of their local small business members. We appreciate the leadership of Sen. Wyden and his work on behalf of Main Street Businesses.”
Add NAFCU President and CEO Dan Berger, “We thank Senator Wyden for his leadership in supporting small businesses and credit unions as our nation grapples with the economic impact of the coronavirus pandemic. We need smart, proactive solutions that help our economy get from crisis to recovery, and this legislation does just that by allowing credit unions to provide greater service to many of our nation’s smallest businesses as they face the tough economic challenges ahead. NAFCU supports this effort and we applaud Senator Wyden for introducing this important legislation.”
A copy of the legislative text is available here.
Senate Bill
Separately, in the Senate, a bipartisan group of senators have introduced the Small Business Expense Protection Act, which would clarify small businesses can deduct eligible expenses that were paid for by forgivable paycheck protection program (PPP) loans from their taxes.
As CUToday.info has reported, there has been some confusion around the Paycheck Protection Program and especially how it can be used so as to comply with rules that ensure the loans are forgiven. Worries over the issue were described as the “next shoe to drop."
PPP loans, created by the Cares Act, are intended to be used by small businesses to cover payroll costs and other employee benefits, as well as some facility and operational costs – many of which are usually tax deductible. PPP borrowers can apply for forgiveness in an amount equal to the sum of these costs during the eight-week period from loan origination.
IRS Issues Notice
In addition, the IRS las week released a notice stating businesses that receive a loan through the program cannot deduct otherwise tax-deductible expenses if the payment of the expense results in forgiveness of a covered PPP loan. The IRS notice references a section of the Internal Revenue Code that prevents double tax benefits.
According to NAFCU, if passed, the proposed legislation, introduced by Sens. Chuck Grassley (R-IA), Marco Rubio (R-FL), Ron Wyden (D-OR), John Cornyn (R-TX) and Tom Carper (D-DE), would make clear that businesses can deduct items such as wages and rent that were paid by with PPP loan funds and invalidate the IRS notice. A similar bill has been introduced in the House by Rep. Lizzie Fletcher (D-TX).
DCUC Indicates Support
Seoaratelt in Washington, the Defense Credit Union Council (DCUC) has sent letters to the heads of NCUA, the Senate Armed Services Committee, the House Armed Services Committee, and the Department of Defense supporting NCUA’s recent decision to count qualified service members who live on military bases at home and abroad when designating a low-income credit union.
“Our nation’s working families need access to safe financial services and products as we work to rebuild our economy, and NCUA clearly recognized this in this important and forward-looking update to the regulation,” DCUC President and CEO Anthony Hernandez told CUToday.info. “Military families were already struggling before the pandemic. As military spouses lost their jobs the need became even greater. In fact, all of the service relief organizations and local food banks report overwhelming requests to simply put food on the table.”
Hernandez emphasized the decision, “a modernization,” recognizes a new reality, along with the fact that military members often move and deploy overseas while retaining their credit union membership back home.
“The NCUA’s decision will allow more credit unions that serve the military to qualify for designation as a low-income credit union and open the door to more resources—exactly the same resources to help all of America’s working families. This decision was made in the true spirit of serving people of modest means with a common bond,” stated Hernandez. “Anytime we can help the men and women of the military who secure our liberty, credit unions should always strive to do so. It will be disappointing if others in the financial services sector cling to the tired rhetoric of the past and try to obstruct consumer access to credit union service.”