I may be the new CEO of the Credit Union National Association (I just started on Sept. 22), but the priorities of credit unions are clear to me: Protect the credit union tax exemption; reduce the regulatory burden, and achieve the shared vision that “Americans choose a credit union as their best financial partner.”
Let me zero in on the tax exemption – which, all too often, becomes the target of the banking industry and their trade associations.
{mosads}I’ve done my share of reading and research in preparation for my new role at CUNA. I know that banks and their lobbyists like to say credit unions are “virtually indistinguishable” from banks and as such should not be exempt from paying federal corporate income taxes.
But I’ve come to the conclusion that statement from bankers is just flat wrong. There is a strong and key distinguishing characteristic between credit unions and banks: Their beneficiaries.
At a bank, the beneficiaries are the shareholders – who expect as much profit be returned to them as possible from the bank.
At a credit union, the members (who own the credit union) are the beneficiaries. Because of the cooperative ownership structure, any excess earnings of a credit union are redirected back to all members in the form of lower loan interest rates and higher savings yields.
And credit unions deliver. The research that CUNA has shared with me shows credit union members in 2013 realized financial benefits of nearly $6 billion, just by saving at, borrowing from or acquiring other financial services from their credit unions, rather than from a bank.
Congress bestowed the tax exemption in 1934 based on credit unions’ cooperative structure and mission to provide people with access to credit for provident purposes such as borrowing to buy a car, a home or to help finance a small business. The goal was to have credit unions compete with banks to ensure that consumers have access to affordable financial services.
So far, so good. Earlier this summer, credit unions reached a landmark 100 million memberships, built on several years of very strong growth. This growth has been driven in part by growing consumer dissatisfaction and distrust of banks in the aftermath of the financial crisis.
Banks have long complained about the credit union tax status. They were doing so when I served in Congress from 1991-2006, and surely before and after my tenure. In all that time, banks haven’t gotten very far in their demand the credit unions tax exemption must go away.
But they keep asking. As Rep. Denny Heck (D-Wash.) said at a recent Hill Forum: “To keep coming to us and asking for that, waiting for it to happen, is a little bit akin to leaving the landing lights on for Amelia Earhart. Credit unions are not taxed the same as banks as a matter of policy.”
Earlier this year, the House Ways and Means Committee adopted a “blueprint” for tax reform. The committee’s plan proposed many of changes in tax law, such as removing more than 200 tax preferences, including some enjoyed by banks.
But the credit union tax exemption was left untouched by the House tax-writing committee. That’s significant.
I’m still learning a great deal about credit unions. But this I know: I’ve landed at CUNA and, under my watch, the credit union tax exemption will be strongly and completely defended. It’s time for bankers to turn off the landing lights, and move on.
Nussle is president and CEO of the Credit Union National Association (CUNA).