SOMERSET, N.J. (8/3/15)--Despite inaccurate attacks from banks regarding credit unions’ tax status, credit unions pay a number of taxes, wrote the president/CEO of a New Jersey credit union in a weekly business journal.
John C. Gibardi, president/CEO of Entertainment Industries FCU, Elizabeth, N.J., and chair of the New Jersey Credit Union Advisory Council, corrected these inaccuracies while spelling out the true benefit of the member-owned, not-for-profit cooperative financial system in NJBIZ.com last week.
“Credit unions do pay taxes. Credit unions pay payroll and real estate taxes, and state charter credit unions pay unrelated business income taxes and New Jersey sales and use taxes ... credit union member-owners pay personal income taxes on interest and dividend income from their credit union,” he wrote. “In fact, when it comes to Federal corporate and personal income taxes, credit unions are taxed identically to one-third of all U.S. banks, those established under Federal law as ‘Subchapter S’ corporations.”
Gibardi noted that, somewhat ironically, a number of New Jersey bankers who spearheaded the latest attack on credit unions are Subchapter S banks, which pay no federal corporate income taxes.
“I suspect that the other members manage their balance sheets to minimize taxation and maximize shareholder earnings,” he wrote. “Credit unions on the other hand do not have shareholders to please. Credit unions are answerable only to their members and as such are able to provide financial benefits such as higher returns on savings, lower interest rates on loans, and fewer fees than for-profit banking institutions.”
Those lower interest rates on loans, fewer fees and higher savings account returns benefit American consumers $10 billion a year.
“New Jersey credit union members received $54.9 million in direct financial benefits in 2014 while non-members benefited to the tune of $21.4 million because of credit union competition in the state’s financial services marketplace,” Gibardi wrote.