Sen. Hatch asks IRS to consider making large credit unions report financial info

Senate Finance Chairman Orrin Hatch (R-UT) is calling on large credit unions to report financial information required of other tax-exempt institutions.

Orrin Hatch

In an April 24 letter to the acting commissioner of the Internal Revenue Service (IRS) David Kautter, Hatch suggested that large credit unions should file Form 990 information returns to insure transparency and accountability.

For decades, the IRS has exempted federal credit unions from the annual information return filing requirement, in part because they are supervised by the NCUA and also because they do not pay the Unrelated Business Income Tax (UBIT). But during that time there is no question that federal credit unions have grown in size and complexity, which should give us pause to reflect whether that exemption is still warranted, Hatch wrote.

Hatch said other complex tax-exempt organizations, such as hospitals and large universities, file the Form 990 information return.

“Should the IRS consider this change — which is well within the authorities Congress has granted to IRS — it may be appropriate to expand the information return requirement only to the largest federal credit unions or those with expanded commercial activities or fields of membership,” Hatch added.

The Independent Community Bankers of America (ICBA) came out in support of Hatch on this issue.

“As these financial firms grow and receive new powers from the NCUA (National Credit Union Administration), Congress should examine whether their multibillion tax exemption is still warranted. Chairman [Mark] McWatters’ admission that the credit union industry’s insurance fund is underwritten by American taxpayers only underscores the need to review and ultimately abolish this taxpayer handout,” ICBA President and CEO Camden Fine said.

Fine was referring to McWatters recent statement in a letter to Hatch that stated eliminating the credit union tax exemption would create a “safety and soundness issue” at the industry’s Share Insurance Fund, which insures deposits held in credit unions.