One of the “hot button” issues we faced this past year was the possibility of credit unions losing their non-profit status. Certain interest groups in Washington D.C. were promoting this legislation to both “level the playing field” in financial services and to raise tax revenues. However, unlike others on the field, credit unions are co-operative, member-owned organizations that can only support growth by generating earnings. Without simultaneously providing us the ability to offset earnings lost to taxes (by allowing us to make more member business loans or raise supplemental capital), taxation for credit unions would greatly affect our ability to grow, offer competitive rates, and invest in new technologies and services.
When we surveyed you in 2013, 96% of you opposed such legislation, voicing strong opinions and urging us to fight to retain Tech CU’s non-profit status. Well, we did, and so did many of you by contacting your representatives in Congress. I’m pleased to report that we’ve had some success in this arena.
In the recent tax reform “discussion draft” issued by House Ways and Means Committee Chairman Dave Camp (R-Mich.), there were no changes to the credit union tax exemption. Representative Camp, himself, stated that, “the CU tax exemption is not going to be addressed in this bill.” In response to this news, Dan Berger, CEO of NAFCU (National Association of Federal Credit Unions), said that, “Congress has no appetite for repealing credit unions' federal tax exemption.”
Thank you to all our members who joined in to help in this fight against taxation for credit unions. While we are cautiously optimistic that this issue may have dissipated for the time being, none of this is truly over until the President signs the final tax reform bill. Now is the time to remind our legislators that credit union members are opposed to taxation. Go to Connect for the Cause on the California Credit Union League’s website and tell your representative, “Don’t Tax My Credit Union.”
On another front, in an effort to be somewhat consistent with equivalent bank requirements for capital, our regulator, the NCUA, recently proposed a risk-based capital rule for credit unions. Unfortunately, while there is some superficial similarity, the credit union rule is much more restrictive and punitive than the bank rule. I suggest reading the article, “Risk-Based Rule Lets NCUA Manage CU System,” written by Paul Gentile, president/CEO of the Massachusetts, New Hampshire and Rhode Island credit union leagues, to find out more about this important issue.
More than fifty years ago, forward-thinking high-tech employees at Fairchild Semiconductor knew there was a better way to bank.
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