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BANKS, CREDIT UNIONS GO TOE-TO-TOE AT WAYS AND MEANS

November 04, 2005

The credit union industry has had better days in Congress than they had yesterday.

The House Ways and Means Committee held hearings on the tax-exempt status of credit unions. The committee chairman, William Thomas, was less than sympathetic to the credit unions, according to a story in Tax Analysts:

Thomas directed some of his toughest comments to NCUA Chair JoAnn M. Johnson. He told her that as credit unions have continued to grow and offer different products, NCUA has not seemed sensitive to the downside of those changes.

Thomas also said that although members of a credit union are supposed to have a common bond with each other (such as the same occupation or neighborhood), that common bond is not possible with larger credit unions. He mentioned a credit union chartered to serve residents of Los Angeles County, which has more than 10 million people.

Johnson acknowledged that some large credit union charters have been granted and said they have been beneficial. When Thomas asked her what common bonds might exist between members of a credit union serving a large community such as Los Angeles County, she mentioned things like common use of the county’s facilities.

By that logic, there's no reason Iowa couldn't have a statewide credit union; our 2.95 million people have at least as much affinity for one another as LA County's 10 million. And I'm sure we're better-looking.

It is hard to understand why a $1 billion tax-exempt institution would get to compete on a tax-exempt basis with the hundreds of fully-taxed Iowa banks less than 1/4 that size, but there is no real expectation that the tax exemption will end anytime soon. The President has come out for continued credit union tax exemption, and that probably settles the issue until at least 2009.

Prior Tax Update coverage:

TAX FOUNDATION STUDY SLAMS CREDIT UNION TAX EXEMPTION

BANKS, CREDIT UNIONS SQUARE OFF

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