CU Times - 3/30/2010 By Sarah Snell Cooke
Credit unions should leave no sacred cows in the field, and one of these that needs to be set free is the credit union tax exemption. Yes, it should be preserved but that depends upon the cost. The benefit should not be taken lightly or given up without a fight but it can’t be a line in the sand either.
The tax-exempt status of credit unions could prove to be more of bane than a boon; it cannot stymie progress. Credit unions should never back away from what they need to succeed, such as risk-based capital, alternative capital, member business lending, open fields of membership, just because of the threat of taxation.
Consider this: according to FDIC data obtained by NAFCU, 3,605 banks did not pay any federal or state taxes in 2009. This included TARP-bloated Citibank and Bank of New York Mellon all the way down to $4 billion Nevada State Bank; they all received massive refunds! How’s that for a tax-exemption?
It would be a mistake for Congress to decide to start taxing credit unions because they are not-for-profit cooperatives that do a world of good for their members. Credit unions can still behave like credit unions even if they were to be taxed. But, if in the end, it did mean credit unions would have expanded capital resources and service authorities, they would be better positioned to succeed after taxation rather than being stuck in a 1934 capital structure in today’s market place.