HIGHTSTOWN, N.J. (7/8/15)--A letter to the editor defending the credit union tax status penned by New Jersey Credit Union League President/CEO Greg Michlig was featured on the Star-Ledger website Tuesday.
“Because credit unions are member-owned not-for-profits, they have no outside shareholders to please with profits,” Michlig wrote. “This places their focus on people instead of profits, a key distinction in providing consumers an alternative to traditional for-profit banks.”
Michlig also noted that one of the core missions of the credit union industry is to enhance the economic standing and financial literacy of its members. He cited several examples of such programs in New Jersey.
“Our financial reality fairs program brings financial literacy into schools to help New Jersey students learn personal finance,” he wrote. “We are also a key supporter of the New Jersey Coalition for Financial Education's programs to enhance financial literacy across the state. And, through our Banking You Can Trust social media efforts, we continually share tips on financial wellness.”
With a focus on cooperative principles, credit unions also serve low-income consumers who are often neglected by traditional financial institutions or targeted by predatory lenders--a philosophy that was best exemplified during the recent financial crisis, Michlig wrote.
“Credit unions have grown in assets and memberships not because of any tax advantage, but because they deliver services their members want at a low, reasonable cost,” Michlig wrote. “Moreover, as a benefit to consumers, they act as a check on other institutions’ rates and fees and help the economy grow.”
Credit unions do pay taxes, Michlig added. “Credit unions pay payroll and property taxes, state charter credit unions pay unrelated business income taxes and here in the Garden State, state charter credit unions pay sales and use taxes,” he wrote. "Credit unions are exempt from Federal corporate income tax because of their structure and mission: member-owned, not-for- profit financial cooperatives that promote thrift and provide members access to credit.”
Credit union member-owners also pay personal income taxes on interest and dividend income they receive on their credit union accounts, Michlig noted. “In fact, when it comes to Federal taxes, credit unions and their members are taxed in a manner that is substantially similar to the preferential tax treatment enjoyed by one-third of all U.S. banks, those with the federal government’s Subchapter S status, which pay no Federal corporate income tax.”