FOR IMMEDIATE RELEASE
Another Study Advises Reassessing Mega-Credit Union Tax Exemption
Washington, D.C. (May 12, 2004) - As Independent Community Bankers of America (ICBA) members lobbied Capitol Hill yesterday, advocating an end to tax-exemptions for mega-credit unions, the Thomas Jefferson Institute on Public Policy released a study calling on Congress to consider taking such action.
The 38-page study, prepared by Richmond, Va., economic research firm Chumra Economics & Analystics, examines the competitive playing field between credit unions and banks. It recommends that Congress consider dropping the tax-exempt status of mega-credit unions as it did for mutual savings banks five decades ago.
"Taxing credit unions across the board is not warranted," the study concludes. "However, a segment of credit unions, most notably some of the largest credit unions, and particularly those that have aggressively used multiple and community common bonds to grow, appear to have become indistinguishable from banks."
According to the study, the Revenue Act of 1951, in which mutual savings banks lost their tax-exempt status, should guide Congress in considering the current tax-exempt status of giant credit unions.
The Chumra study also recommends establishing Community Reinvestment Act-like rules to ensure that credit unions adhere to their original tax-exempt purpose of serving people of modest means. "It appears that the focus of credit union activity has strayed from its initial purpose of helping people of modest means meet their credit needs," the study concludes.
ICBA President and CEO Camden R. Fine welcomed the Chumra study's conclusions. He said the study echoes the findings of other studies, including a General Accounting Office study last year noting the rapid growth of mega-credit unions. Nearly 100 credit unions have assets of $1 billion or more.
"The evidence is clear-and growing," Fine said. "It's time for Congress to level the playing field between community banks and the country's tax-exempt mega-credit unions. Enough is enough. American taxpayers should not be footing the bill to help mega-credit unions simply compete directly against community banks."
Editor's Note: A high resolution photo of the ICBA members preparing to leave for Capitol Hill is available at http://www.icba.org/2004jcmphotos.html.
The complete study is available at http://www.thomasjeffersoninst.org/pdfs/cu-study.pdf.