NEW YORK–The president of the Florida Bankers Association blasted the credit union tax exemption in a Wall Street Journal editorial, arguing any credit union over $500 million in assets should pay corporate income taxes.
“The problem with modern American credit unions boils down to a simple question: Why should a family of four pay more income taxes than a $90 billion financial institution?” wrote Alex Sanchez, president of the FBA. “That’s the total amount of assets held by Navy Federal Credit Union. Yet it is exempt from federal and state corporate income taxes, as well as sales taxes (and, in my home state of Florida, intangible taxes). This is corporate welfare.”
In the op-ed Sanchez claims the “original intent” of credit unions was to allow people with a “common bond” to pool their resources but that it has been “stretched beyond recognition.”
He cited the $3.1-billion MidFlorida Credit Union that was founded to serve teachers in 1994 but now serves 300,000 people across a wide area to argue his point.
He further noted there are now 304 CUs of more than $1 billion in assets, “yet these institutions pay hardly any taxes, unlike the banks they are often competing with.”
‘Is This What Congress Intended?’
As has become a common theme in many banker attacks on credit unions, Sanchez cited credit unions that have bought naming rights to various stadiums and entertainment facilities as an example of why CUs no longer deserve the tax exemption. Among those named by Sanchez: The Golden 1 CU’s $120-million naming rights deal for the home arena of the Sacramento Kings; CFE Federal Credit Union’s $4 million deal to put its name on the basketball arena at the University of Central Florida, and San Diego County Credit Union’s $500,000 agreement for the naming rights to what is now known as SDCCU Stadium.
“Is this what Congress intended for credit unions to do with their tax-exempt status? Purchase the naming rights for stadiums and arenas?” wrote Sanchez. “Lawmakers ought to eliminate this outdated and abusive tax loophole for large credit unions. A similar action was taken decades ago on mutual savings banks. Lawmakers revoked their tax exemption in 1951 when it became clear they were actively competing with taxable financial institutions.”
Sanchez said Congress should “keep the tax exemption for smaller credit unions that serve customers with a genuinely tight common bond—say, a well-defined group of company employees, church members or university faculty. Credit unions that reach $500 million in assets should lose the exemption. So should credit unions of any size that compete head-to-head with banks by offering commercial and business loans or services like wealth management. This plan is fair to all sides…”