Credit unions around the country want their members to memorize one phrase right now: Don’t tax my credit union.
The credit unions have enjoyed tax-exempt status since the 1930s, but lawmakers could push them to pay with new federal regulations.
Paul Gentile, VP of Communications at the Credit Union National Association, believes this repeal would jeopardize operations at credit unions nationwide.
“If the tax exemption goes away, the credit union charter would simply go away," Gentile says. "There would be no reason to remain a credit union if the tax exemption was gone.”
Credit unions are categorized as member-owned, non-profit organizations. But supporters of the repeal, like the American Bankers Association, argue that credit unions continually act like banks and should therefore be taxed like them. Gentile thinks otherwise.
“One of the things bankers aren’t telling people is that credit unions have a lot more restrictions than they do, such as higher capital standards and caps on small business lending,” he says. “If we have it so great as credit unions, then Banks should convert to credit unions, which is very easy to do.”
Campaigns for and against credit union tax exemptions have intensified as lawmakers in Washington discuss possible changes to nation’s tax code. As this occurs, Gentile remains hopeful that leadership in congress will take his argument into consideration.
“Credit unions serve middle America, they provide a financial alternative like no other in the marketplace. We are there solely for our members and want them to know if this exemption goes away it would dramatically impact the charter going forward and likely the benefit they enjoy today. 96 million members would go away.”
The Joint Committee on Taxation estimates that between 2013-2017 the cost of these tax-exemptions will equal $3.9 billion.