Tuesday, July 16, 2013
The L.A. Times reports that the American Bankers Association (the other ABA) has launched a full-court press to convince the President and Congress to eliminate the income tax exemption for credit unions. Found in Internal Revenue Code § 501(c)(14)(A), the exemption is available to "[c]redit unions without capital stock and operated for mutual purposes and without profit." The ABA is trying to build on the President's Economic Recovery Advisory Board's 2010 tax reform report that proposed eliminating the exemption in order to raise an additional $19 billion over 10 years for the federal government (pp. 77 & 79 of the report). The ABA's effort is opposed by the National Association of Federal Credit Unions (NAFCU), which has approximately 3,800 federally chartered credit union members, and which contends that removing the exemption would cost consumers about $10 billion a year in higher fees and interest rates on loans and lower interest rates on savings. According to the L.A. Times article credit union membership is now over 95 million. The ABA's latest effort apparently included a letter to Senate leaders of the Finance Committee, to which NAFCU promptly responded. While this effort is not new on the part of the ABA, it may have more traction than previously because of both the current fiscal climate and the ongoing tax reform discussion.