Congress Lays Tax Exemption On The Table Next To MBL Cap

CU Journal - Friday, November 18, 2011

WASHINGTON – The moment the credit union lobby dreaded came Wednesday when one long-time lawmaker during a congressional hearing said if credit unions want to increase their member business loan limits they should have to accept some kind of diminution of their federal tax exemption.

“I want all those present and watching to know that I remain committed to requiring credit unions to be subject to federal taxation if they want to increase their commercial lending limit,” said Ruben Hinojosa, an eight-term Democrat from Texas, during a hearing on a regulatory relief bill for banks to which credit unions want to attach measure to increase the MBL limit.

Hinojosa’s position was no surprise to credit unions, as he alluded to the tax exemption in a less direct way during last month’s hearing on a bill to raise the MBL limit from its current 12.25% of assets to 27%.

But Wednesday’s direct attack lays bare the risks credit unions are running as they seek to expand powers in certain areas long dominated by local banks, that is, putting the tax exemption on the table. In fact, during last month’s hearing at least two other members of the House Financial Services Committee also expressed doubts to the credit union bid, an unusual public expression of opposition to the MBL bill at a hearing reserved for the credit union priority.

In fact, several banking lobbyists insisted last month the tax exemption should be discussed in exchange for an increase in the MBL limit. “If credit unions would like to have the discussion about exchanging their tax status for increased business lending privileges, we will be the first one at the table,” said Rose Oswald Poels, president of the Wisconsin Bankers Association, in conjunction with the hearing.