TACOMA, Wash.–The CEO of a bank that was once a credit union is now calling on Congress to revisit the CU tax exemption.
Laurie Stewart, a former chairman of the American Bankers Association and CEO of Sound Community Bank, reiterated in comments published by the ABA Banking Journal the trade group’s latest arguments that credit unions are causing a loss of tax revenue.
Sound Community Bank was formerly Credit Union of the Pacific, which in 2003 converted to a bank charter.
Stewart said the credit union tax exemption will led to “nearly $25 billion in lost revenue by 2031.”
While stating there are still “some very small, quintessential credit unions that are operating as designed,” the majority of credit unions, she said, “have graduated to be banks” and should be taxed accordingly.
As CUToday.info has reported, the banking industry has in recent years attempted to divide CUs, saying only “large” credit unions should be taxed.
According to the ABA Banking Journal report, “Stewart recounted her own experience in converting her institution from a credit union to a bank—which it did as part of a strategy to offer products and services to the community that were at the time beyond the scope of credit union activities. Originally, the institution was sponsored by a cooperative grocery wholesaler, and its clients shared a common bond—a key element of the credit union charter.”
Congress Should ‘Shine a Light’
However, the report added, “Stewart noted that for her institution and many others, those dynamics changed over time, and today, many tax-advantaged credit unions compete directly with taxpaying banks.”
“As that common bond goes away and we’re all doing business in the same environment, [if]credit unions are cultivating the same customers that [banks are] cultivating—and in fact more affluent customers in many cases—then we don’t have that ability, that unique field-of-membership, common bond that supported the tax deduction,” Stewart said. “I would encourage Congress to shine a light on the entire industry and really understand what credit unions are doing, at what levels, when they look like banks, when they don’t look like banks and then move to a rational form of taxation, leaving a not-for-profit exemption for true non-for-profits.”