Credit Union Tax Exemption Mistakenly Included in House Bill

A bill introduced in the House in September that would eliminate 29 federal tax expenditures mistakenly includes the credit union federal tax exemption, according to the bill’s drafter.

When the full text of H.R. 6474 became available yesterday, the Credit Union National Association (CUNA) and the League of Southeastern Credit Unions (LSCU) identified language in the bill that threatens the federal income tax exemption for federal and state-chartered credit unions. The bill was introduced before Congress’ break for the elections, but only the bill’s number and a very generic description were published in the Congressional Record at the time.

Representatives from CUNA and the LSCU quickly arranged meetings with the office of Rep. Dennis Ross (R-Fla.), the bill’s drafter, and learned that the inclusion of the credit union tax exemption as a tax expenditure slated for phase-out was an error.

“In the course of our discussions with staff, they indicated emphatically that the inclusion of the credit union tax status was a drafting error,” CUNA President and CEO Bill Cheney said Wednesday. “The credit union tax status was intended to be retained, not eliminated.”

H.R. 6474 is the House version of a package of Simpson-Bowles provisions recommended as part of a broad plan to reform the tax code and rein in the federal budget. The proposed phase-out of certain tax expenditures, including the credit union exemption, Social Security and Medicare, would be accomplished from 2013 through 2017.

“We are aware that the Simpson-Bowles Plan, which has been around for a couple years, has included mention of our tax exemption,” said Jennifer Wagner, vice president of legislative advocacy for the Northwest Credit Union Association (NWCUA). “Many more bills will be introduced in the coming weeks and months to address the budget deficit, and at the end of the day, we’ll see comprehensive tax reform legislation. We feel good about defending our tax exemption but that doesn’t mean we won’t have to fight for it.”

House rules do not permit the withdrawal or modification of the bill at this time, but Ross and his staff have worked to provide quick clarification on the issue, assuring credit unions that changes to bill would be made immediately if the bill sees any movement in the House, which is considered unlikely given the short remaining legislative calendar. The bill would have to be re-introduced next year to be considered, giving Ross the opportunity to modify the language before re-introduction.

Ross has a strong record of support for credit unions, and he is currently a co-sponsor of H.R. 1418, the House version of the credit union member business lending (MBL) bill, and of H.R. 3461, the Financial Institutions Examination Fairness and Reform Act.

“This episode is a reminder of the threat that the tax status is under in an environment where Congress is considering comprehensive tax reform,” Cheney said. “We have been and continue to monitor tax legislation closely, and we will continue to work closely with policymakers to ensure that the credit union tax status is maintained.”

The National Commission on Fiscal Responsibility and Reform, often referred to as Simpson-Bowles because of the commission’s co-chairs, Reps. Alan Simpson and Erskine Bowles, was, according to the commission’s website, created in 2010 by President Obama “to address our nation’s fiscal challenges. The commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.”

 

Questions? Contact a member of the Association’s Legislative Affairs team:

Jennifer Wagner, Vice President of Legislative Advocacy
Mark Minickiello, Vice President of Legislative Affairs
Pam Leavitt, Policy Advisor

Posted in Advocacy News, Compliance, Compliance News, Federal.