Credit Union Times
December 9, 2014
Sen. Tom Coburn (R-Okla.) recommended eliminating the “unexplainable” credit union tax exemption in a new report on the tax code released on Tuesday.
“Congress should eliminate the tax-exempt status of credit unions as part of comprehensive tax reform, a process by which members of credit unions and non-members alike will undoubtedly benefit from the bounty of enhanced economic growth,” Coburn, a member of the Senate Banking Committee, wrote in the report titled, “Tax Decoder.” Coburn called credit unions’ tax-exempt status a skewed policy that benefits a select few at the expense of the many, costing taxpayers an estimated $2.1 billion in FY2014 and $11.9 billion from FY2014-2018.
“Supporters of the tax exemption claim that despite deregulation, credit unions are still unique depository institutions. However, the Government Accountability Office notes that ‘as the credit union industry has evolved, the historical distinction between credit unions and other depository institutions has continued to blur,’” Coburn's report said.
“Moreover, consolidation in the industry has resulted in the more than 100-fold increase of credit unions with more than $1 billion in assets over the last 20 years. As of 2012, more than half of the total assets held by the industry are controlled by fewer than 200 credit unions (or 2% of all credit unions),” the report also said.
Coburn, who leaves Congress at the end of the year, argued the current credit union model is not consistent with the original justification of the special tax treatment for credit unions.