Credit Union Tax Exemption Expected to Come Before Congress in 2013
January 3, 2013
January 3, 2012
There are some things that never go away, and every holiday season we are reminded of their surprising durability. In your Christmas stocking this year, it may have been the Chia Pet or the Clapper. For America’s credit unions, it is the annual lump of coal from the banking industry engraved with one word: “taxation.”
At least the first two can be good for a few laughs. This time, the threat of a strong assault on the federal tax exemption for credit unions is being taken very seriously, both by national credit union advocates and by the government affairs staff of the Northwest Credit Union Association (NWCUA).
Credit Union National Association (CUNA) lobbyist John Magill clearly sees the battle looming. “You can count on it!” he said recently. NWCUA Vice President of Legislative Advocacy Jennifer Wagner agrees.
“We anticipate that protecting our federal tax exemption will be front and center on our legislative agenda next year,” Wagner said
Wagner notes that there is serious talk about tax reform by both parties as we head into the next Congress. While both have distinctly different approaches, it means the credit union exemption will be caught in a very large basket.
“Congress will put everything on the table as part of a larger tax reform discussion,” Wagner said.
Congress is eager to raise revenue, although there is a wide divergence of opinion as to whether the revenue should be derived from increasing existing taxes or by reducing or eliminating tax exemptions. The American Bankers Association has signaled an all-out assault on the long-standing credit union exemption saying it will add at least $2 billion to the federal coffers while providing “tax fairness.” They bolster their argument by citing a recent study by The Tax Foundation suggesting the exemption should be on the table for consideration.
Credit unions have been successful in fighting every threat on their Great Depression-era exemption, but a divisive and unpredictable Congress is cause for concern. While it is highly unlikely that Congress would risk a straight up or down vote on credit union taxation, such a change could be incorporated into a much broader piece of tax reform legislation that would give members a place to hide, so to speak, by defending any vote through the prism of an overall package of reforms their constituents might support.
Wagner said the NWCUA team will watch vigilant for such moves and continues to remind legislators of the tremendous value afforded consumers by preserving the status quo.
Among the top arguments include a recent National Association of Federal Credit Unions (NAFCU) study that suggest the gross domestic product (GDP) could be reduced by $148 billion, resulting in a loss of 150,000 jobs if the exemption were repealed. The same study shows that the relatively small gain in federal revenue would be more than wiped out by the loss of consumers’ personal income.
The NWCUA will continue to press the Northwest congressional delegation to remain firm and, like the aforementioned Clapper, turn out the lights on the banking lobby’s latest taxation plea.
Questions? Contact a member of the Association’s Legislative Affairs team: