WASHINGTON— In a development that some may view as a setback in the credit union tax fight, the Senate Finance Committee has advanced the nomination of Kenneth Kies for Assistant Secretary of the Treasury for Tax Policy.
As CUToday.info reported, the Defense Credit union Council and Washington CU advocate John McKechnie have shared concerns about Kies and his position on CU taxation.
In early April, the Defense Credit Union Council pointed to Kies’ history of advocating for the repeal of credit unions' tax-exempt status. The trade group then sent a letter to the Senate Finance Committee, urging the group to question Kies on his stance and seek a public commitment that he will not pursue policies that would undermine credit unions' mission.
"Mr. Kies has a well-documented history of advocating for the elimination of credit unions’ tax-exempt status. As co-author of a report, he argued that credit unions ‘no longer have any policy or economic justification’ for exemption and recommended that Congress revoke the exemption to 'level the playing field' with banks,” DCUC wrote.
America’s Credit Unions reacted to the committee’s vote.
“When banks hold over 91% of assets, and have since the existence of credit unions, it is impossible to claim that credit unions provide any real competition to banks. Credit unions are integral to strong local economies—their not-for-profit status is proven to make financial services more affordable for all,” stated Jim Nussle, America’s Credit Unions president/CEO.
Nussle noted that a recent survey from J.D. Power shows consumers trust credit unions, including large credit unions, more than banks.
“Revitalizing communities is a priority for the Trump Administration, and preserving credit unions’ tax status is smart policy to accomplish this goal,” he said. “It's important to note that Kenneth Kies did not specifically call out credit unions in his responses to the Senate Finance Committee related to tax policy ensuring a level playing field, and we continue to engage with nominated officials to ensure they have the facts about the credit union difference.”
ACU added that America's Credit Unions will be submitting a letter to the Senate as they prepare to vote on Kies' nomination.
As CUToday.info reported, just over ten years ago Kies co-authored a seven-page report for Deloitte that advocated the repeal of the federal tax-exempt status for credit unions of all sizes.
Kies, currently managing director of the Federal Policy Group, LLC, has also done consulting work for the American Bankers Association and has been outspoken on his position of favoring taxing credit unions.
The seven-page report, co-authored by Kies and Bert Ely, principal of Ely & Associates, states: “Unlike other financial institutions like banks and thrifts, credit unions do not pay corporate taxes on their income. This puts them at a competitive advantage relative to other financial institutions for tax reasons. Eliminating this exemption would raise revenue and level the playing field.
“Credit unions have grown to control a significant share of the market for banking services, particularly in retail banking. However, unlike their direct competitors—commercial banks and thrift institutions—credit unions do not pay corporate income taxes,” the report continues. “This huge tax expenditure—nearly ten billion dollars over the next five years, according to the Office of Management and Budget—no longer has any policy or economic justification. Credit unions have evolved to become large financial institutions which provide services that are identical to their taxpaying competitors. In order to level the competitive playing field in the banking industry, all credit unions should pay corporate income taxes.”