WASHINGTON–One day after NCUA Chairman Mark McWatters responded to a letter from Sen. Orrin Hatch demanding a justification for the credit union tax exemption, Hatch has now sent a letter to the IRS asking that federal credit unions file annual returns that ensure they are complying with the reasons Congress granted the tax exemption.
NAFCU called the Hatch request “tired rhetoric.”
In the letter to David Kautter, the acting IRS commissioner, Hatch offered a caveat, suggesting that if the tax collecting authority required FCUs to file a form 990, it could consider requiring only the largest credit unions to do so.
In the letter to the IRS Hatch states that Congress in 1934 granted the tax exemption in exchange for credit unions’ promoting thrift among members and providing low-cost credit. Hatch said the CU tax exemption is currently valued at approximately $2.5 billion and that he believes it is necessary to ensure credit unions continue to fulfill their “intended vision.”
“For decades, the IRS has exempted federal credit unions from the annual information return filing requirement, in part because they are supervised by NCUA and also because they do not pay the Unrelated Business Income Tax,” wrote Hatch. “But during that time there is no question that federal credit unions have grown in size and complexity, which would give us pause to reflect whether that exemption is still warranted.”
Filing a form 990, said Hatch, would provide “greater transparency” to both the IRS and the public for the operations of a credit union, said Hatch in the letter.
In response, NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt, said, “NAFCU supports transparency, but not at the cost of additional red tape with no benefit. A credit union is a credit union regardless of size, and NAFCU strongly supports all credit unions robustly serving their members. While we appreciate Chairman Hatch's focus on oversight, the suggestions he outlined in the letter are identical to the tired rhetoric we hear time and again from bankers."