WASHINGTON–Why is the nation’s banking industry suddenly calling for a congressional review–including a public hearing–of the credit union tax exemption just as thousands of credit union representatives are headed to town?
It’s a perplexing question, Washington analysts say, noting they have not yet heard of any plan to hold the hearings the bankers are demanding, but also emphasizing that should not be taken as a sure sign that nothing will happen.
As CUToday.info reported, the Independent Community Bankers of America is calling on Senate Finance Committee Chairman Orrin Hatch (R-UT) to convene a hearing on the credit union tax exemption.
The request by the ICBA follows in the wake of dueling letters from banking groups and credit union associations over the tax exemption. As CUToday.info reported, 52 state bankers’ associations have sent a letter to Hatch arguing taxpayers should no longer “subsidize” the nation’s largest credit unions. CUNA and NAFCU responded with a joint letter of their own calling the bank letter the “height of arrogance."
With Hatch not seeking re-election this fall, will he be more likely to call for a hearing?
“We are not picking up any signs on the Hill that a hearing is imminent,” said CUNA Chief Advocacy Officer Ryan Donovan. “There have been hearings (on credit union taxation) in the past, and it is certainly within the prerogative of Congress to look at this, but we are not picking up on anything that would suggest a hearing is in the future.”
“I have not spoken to any member of the Senate Finance Committee who has an opinion one way or another about the likelihood of a hearing,” said John McKechnie, a senior partner at the Washington, D.C.-based public policy and advocacy firm Total Spectrum.
A source requesting anonymity said that the Senate Finance Committee is aware of the flurry of letters from the bankers and credit union trade groups on Hatch’s interest in the credit union tax exemption. But a senior person on the Committee noted that this activity is occurring during this week’s recess on Capitol Hill, and that no movement will happen while the Committee is away. Sources also stated that while Hatch is on his way out of Congress, other members of the Finance Committee are not, and are likely putting pressure on Hatch not to pick this fight.
In ICBA’s letter, the association argues “modern credit unions have failed in every aspect of their public mission and pose a threat to the American tax base.”
“Today’s credit unions are virtually indistinguishable from taxpaying community and regional banks,” ICBA President and CEO Camden R. Fine wrote. “It is widely understood but rarely acknowledged that the tax exemption has outlived its purpose. Now is the time to have that discussion.”
The ICBA noted its request for a congressional hearing follows a letter from Hatch to NCUA Chairman J. Mark McWatters questioning the tax exemption.
Donovan said he is somewhat surprised that bankers have chosen to strongly challenge the credit union tax status right before thousands of credit union people descend next week on Washington for CUNA’s Governmental Affairs Congress.
“It seems like awfully odd time to be raising this issue when you know an army of 5,000 credit union people will be on Capitol Hill,” said Donovan. “And, I also think it’s simply not in their best interests to do this now—we are prepared next week to go to Capitol Hill to push very hard for a bipartisan regulatory relief bill that we think the Senate is ready to take up. So why would banking associations, particularly the small bank association that has a strong vested interest in the legislation as we do, do anything that would distract from the power of credit union advocacy that will be on display in Washington next week? So will our advocacy efforts be stepped up even more next week, you better believe it.”