Former Senate Finance Committee Chairman Orrin Hatch

in letter to Action IRS Commissioner David Kautter

“In recent years NCUA has relaxed credit union field-of-membership rules, expanded commercial lending, and permitted the use of alternative capital in certain circumstances. While these are all well-intentioned decisions, they should give us occasion to pause and review the current state of America’s largest federal credit unions…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.”

Erica York

“Given the change in the financial sector over the last several decades, it would be useful for lawmakers to reexamine the extent to which credit unions currently fulfill their original purpose. If they have strayed from their intended function and now resemble other taxed financial institutions, their exemption would represent a disparity across similar economic activities.”

Aaron Klein

“But if your word is your bond, does everyone who speaks share a common bond? In that case, the concept of a common bond is meaningless. That is the direction that the nation’s credit union movement, including its federal regulator, appears to be moving — and that’s something the public and policymakers need to stop and think about.”

Scott Hodge

“It appears from the way credit unions are marketing themselves that they no longer feel bound by the field of membership restriction, or believe they can stretch the rules to include entire communities or, seemingly, the public at large. As evidence, you don’t have to look any further than the dozens of credit unions that have stepped up to buy the naming rights to sports stadiums and arenas over the past few years. Credit unions were becoming anachronisms before the enactment of the TCJA, but that status should be declared official now that the tax gap between banks and credit unions has effectively been closed. If they are going to act like banks and subsidize sports stadiums like banks, it is time that they paid taxes like banks.”

Yael Ossowski

“With handsomely paid CEOs and hundreds of millions of dollars in assets, we must stop pretending enormous credit unions are charities in need of preferential treatment from Washington. If President Trump and members of Congress want to signal fairness in the new tax code, they should start by eliminating the unfair and indefensible corporate welfare big credit unions receive as a result of their non-profit status. That would go a long way to match rhetoric with reality.”

 

Scott Hodge

“It appears from the way credit unions are marketing themselves that they no longer feel bound by the field of membership restriction, or believe they can stretch the rules to include entire communities or, seemingly, the public at large. As evidence, you don’t have to look any further than the dozens of credit unions that have stepped up to buy the naming rights to sports stadiums and arenas over the past few years. Credit unions were becoming anachronisms before the enactment of the TCJA, but that status should be declared official now that the tax gap between banks and credit unions has effectively been closed. If they are going to act like banks and subsidize sports stadiums like banks, it is time that they paid taxes like banks.”

Brandon Arnold

“So should exploration of historical tax policies that might be modified for changing times. To highlight one of many cases, Congress could review the tax exemption currently provided to all credit unions, bearing in mind there are now 281 credit unions that hold over $1 billion in assets or more and increasingly are competing in a head-to-head manner with traditional banks. Congress should examine whether this exemption should be phased down or capped, while at the same time helping to create a more navigable regulatory on-ramp that would make it easier for such entities to charter themselves as banks.”

Diana Furchtgott-Roth

“Credit unions were originally given tax-exempt status so that they would service lower-income individuals, because banks were not doing so. The situation has now changed, and the tax law should change with it. As Congress proceeds with tax reform, members should consider uprooting this outdated exemption and no longer picking winners and losers. Taxpayers should not have to subsidize a credit union’s name on a stadium, or people’s purchases of aircraft and boats.”

Lynne Breyer

Arizona Freedom Alliance

“There is no reason why these humongous credit unions, with their millionaire CEOs and billions of dollars in holdings, should be treated the same as a small soup kitchen, after-school program or animal rescue organization in the eyes of the IRS. If Congress is committed to making fairer, lawmakers should start by making large credit unions pay their fair share in taxes, while lowering tax rates for businesses that have been contributing to government coffers year after year.”

Erica York

“If, after receiving information about the NCUA’s oversight activity, Congress finds that certain credit unions have strayed from their intended function and now resemble taxed banks, their exemption would represent a disparity across similar economic activity created by the tax code. This shows the importance of regular congressional review of all tax expenditures, as it could reveal areas in need of reform.”

Former Senate Finance Committee Chairman Orrin Hatch

in letter to J. Mark McWatters of the NCUA

“I am concerned that the credit union industry is evolving in ways that take many credit unions further from their original tax-exempt purposes. Recent actions by the National Credit Union Administration (NCUA) have further relaxed field of membership constraints, opened the door to the use of alternative capital, and lifted limits on other activity, such as business lending, which has traditionally been less associated with the mission of tax-exempt credit unions. While there may be worthwhile pursuits, they should give us pause and cause a reflection on the core mission of credit unions and their tax-exempt purpose.”

Scott Pullins

Ohio Taxpayer Association

“There may be justification for allowing small credit unions who provide banking options for small employers and underserved communities to operate tax-free. But it’s totally unreasonable for credit unions that operate dozens of branches and serve tens of thousands of customers to expect to the same treatment from the IRS as a local soup kitchen or animal shelter. Members of Congress should stop being wooed by the checks they receive from big credit unions and wake up to the fact that the industry doesn’t deserve a free ride. If struggling American families have to pay their taxes, the biggest and richest credit unions should have to, as well.”

Josh Daniels

“If Congress wants to make the tax system fairer, lawmakers should focus on unfair tax advantages and loopholes received by certain businesses and industries. To see the most blatant example of one special interest receiving preferential treatment through the tax code, lawmakers need look no further than the ridiculous charity status that allows big credit unions to make millions of dollars without paying a dime in taxes.”

Robert Brett

Roslyn

“Sadly, small banks are threatened by the growth of large credit unions who have spent the decades enjoying special exemptions that allow them to avoid federal corporate income taxes. Credit unions used to limit their membership to specific demographics, but today, large credit unions will accept practically anyone, placing them in direct competition with small banks. Because small community banks must pay taxes, they are ill-equipped to compete. Additionally, credit unions have started to engage in financial functions like commercial lending, which had previously been outside their purview. More than one in five U.S. banks have disappeared since 2010, while big credit unions are getting a leg up over their competition. If it looks like a bank and functions like a bank, it should be taxed like a bank.”

Rob Taylor

“I have colleagues from other small credit unions who share my frustrations. The problem with our movement is most of us have been indoctrinated to believe our common enemy are bankers – with their constant thump of the taxation war drums – when in fact the real threat to our future lies within our own industry. If taxation is in our future, then let it be with the large bank-like credit unions so the entire movement doesn’t suffer from the actions of a few.”