Credit Union Tax Exemption Comes Under Fire in Congress
The powerful chairman of a congressional tax writing committee has questioned the validity of the credit unions' tax-exempt status and said he might hold hearings on this issue in the future.
House Ways and Means Committee Chairman Bill Thomas (R-CA), in a speech to the Federation of American Hospitals, took aim at tax-exempt, non-profit organizations, including non-profit hospitals, but clearly credit unions also were in his cross-hairs. "Now the only rationale to belong [to a credit union] is that you are warm and sometimes vertical," Chairman Thomas said.
Thomas charged that many of the tax-exempt organizations have strayed from their original mission and have come to compete and look like their for-profit competitors. Thomas said the rationale for exempting credit unions from federal taxes "has gotten at least murky, if not lost," and added that Congress should examine tax-exempt organizations to see if they are providing value to the public to justify their tax status.
ICBA has long held that the tax exemption cannot be justified for those credit unions that have strayed beyond their statutory mission of "serving people of small means." The cost to taxpayers is unacceptable, and growing. According to OMB, the cumulative subsidy for the next four fiscal years is a whopping $7.88 billion.
Several weeks ago in this publication, we asked: "We wonder how many people are aware that their hard-earned tax dollars help to subsidize credit unions, and when this federal subsidy will be large enough for Congress to take notice." Chairman Thomas gave us his answer loud and clear. He said removing the tax exemption for credit unions and other tax-exempt organizations could create "an enormous area of potential revenue," a fact that has long been overlooked by Congress. Finally, someone in Congress has broached taxing credit unions.