FOR IMMEDIATE RELEASE
It's IRS Tax Day: Why Aren't the Mega-Credit Unions Paying Their Taxes?
Washington, D.C. (April 15, 2004) - Today, as more than 227 million Americans dutifully file their income tax forms with the IRS, a rapidly growing number of mega-credit unions will not pay one thin dime in federal tax. These giant bank-like credit unions won't be filing tax returns — despite the fact that their direct competitors, thousands of community banks, will.
The U.S. Treasury will miss $12 billion in tax revenues over the next decade because these billion-dollar nonprofit revenue-makers — many of which serve millions of members across large geographic regions in the United States — won't be paying any federal taxes.
"Today more than 80 mega-credit unions each have $1 billion or more in assets," said Camden R. Fine, president and CEO of the Independent Community Bankers of America. "These institutions often serve wealthy to middle-income members, offer a wide range of sophisticated banking products and services, and compete aggressively against community banks. Yet these same institutions don't pay taxes and don't bear the same heavy regulatory burden as community banks."
A recent Government Accounting Office study found that mega-credit unions are the fastest growing segment of the credit union industry, while they do not have to comply with the same burdensome Community Reinvestment Act regulations that community banks do. It also confirmed other studies that community banks serve more low- and moderate-income households than these large credit unions. Yet community banking remains one of the most highly regulated industries in the country.
"Enough is enough," Fine said. "When it comes to today's credit union industry, one well-intentioned statutory mission does not fit all. Allowed to continue to grow unfettered, mega-credit unions will directly threaten the very future of many tax-paying community banks — the financial lifeblood of local economies. It's time that Congress recognize the rapidly growing number of giant credit unions that have abandoned their original nonprofit missions still don't pay taxes."
Nevertheless, not content with its industry's rapid gains and growth, the credit union lobby is pushing a bill, H.R. 3579, that would permit credit unions to nearly double their commercial credit lines while weakening their capital requirements. This does not help credit unions, or taxpayers who might be called in to bail them out if they faced financial difficulties.
With tax day facing hardworking Americans, ICBA is asking Congress to put the brakes on the growth of these bank-like authorities sought by credit unions until their full impact is known. Here are three issues ICBA believes Congress should consider immediately:
- Re-examine the tax-exempt status of mega-credit unions. With the federal government projected to face steep deficits for many years, lawmakers should recognize that giant bank-like credit unions should pay their fair share in taxes. In a time of extraordinary government burdens, including our nation's educational, healthcare and infrastructure needs, these entities should pay their fair share.
- Study the impact of the increasingly liberal field of membership rules credit union regulators have allowed. More than 1,000 credit unions operate with "community" charters, many serving multiple counties, large swaths of entire states, and millions of people. One Utah credit union, for instance, serves 1.4 million members living in a six-county area the size of the state of Maryland. This type of field of membership does not meet the original intent of the statutory requirement for "well-defined, local area."
- Review the expanding business lending authority mega-credit unions are receiving from their regulators. In 2003 alone, business lending by the largest credit unions jumped nearly 50 percent, while the Credit Union National Association reported that 30 percent of the country's credit unions offered business services. Business lending goes far beyond the original tax-exempt purpose of credit unions; this activity is a risky gambit for an industry that lacks this special expertise.
"Unfortunately a credit union doesn't always act like a credit union," Fine said. "Too many large credit unions have lost their way by aggressively using their tax-exempt status and regulatory privileges to expand and grow. On this national tax day, it's never more apparent that Congress needs to address the unfair expansion of mega-credit unions."
For more information, visit ICBA's website at www.icba.org.