The National Association of Federally-Insured Credit Unions (NAFCU) hit back at an association that represents banks after coming under fire for credit unions tax-exempt status.
Last week, NAFCU Vice President of Legislative Affairs Brad Thaler further defended credit unions and the federal tax exemption to lawmakers.
“When ICBA attacks credit unions, they fail to tell you the full truth,” Thaler wrote. “As they attack the tax status of credit unions, they fail to mention that over 1/3 of banks, including a number of their members, are Subchapter S corporations and pay no corporate income tax.”
In February, the Independent Community Bankers of America (ICBA) asked the Senate Finance Committee to hold a hearing on the credit union industry’s tax-exempt status. In a letter to committee chairman Sen. Orrin Hatch (R-UT), ICBA officials said credit unions not fulfilled 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 Fine wrote in February. “It is widely understood but rarely acknowledged that the tax exemption has outlived its purpose. Now is the time to have that discussion.”
Hatch had sent a letter to the National Credit Union Administration (NCUA) in January outlining concerns that credit unions are evolving away from their original tax-exempt purpose.
However, NCUA Chair Mark McWatters wrote to Hatch in April that eliminating tax-exempt status for credit unions would create an issue for the National Credit Union Share Insurance Fund that could potentially fall on American taxpayers to fix.
Thaler added that the credit union industry has grown since the 2008 “as many Americans have turned away from banks and banks have turned away from them.” Thaler said banks exist to make a profit and credit unions exist to meet the financial needs of their members. He cited a recent study by NAFCU that found that the credit union tax exemption benefits $16 billion to the U.S. economy each year.
Thaler added that in recent years, credit unions have declined due to regulatory burdens.
“With this ever-increasing regulatory burden on community financial institutions, we would hope that the ICBA and their members would be more focused on working with their counterparts in the financial services industry to achieve meaningful regulatory relief that will allow all financial institutions to better serve consumers, rather than spending their efforts attacking credit unions,” Thaler concluded.