NEW: Nussle highlights numerous benefits of CU tax status in letter to Senators
April 15, 2015
WASHINGTON (4/15/15, UPDATED 12:30 p.m. ET)--Credit unions' tax status is "good public policy" for many reasons, CUNA president/CEO Jim Nussle highlighted in a letter to the U.S. Senate Finance Committee's Business Income Tax Working Group this morning. In the letter, Nussle reminded Sens. John Thune (R-S.D.) and Benjamin Cardin (D-Md.), who head the working group, of the many ways credit unions remain America's best financial partner.
"More than 102 million working-class Americans--taxpayers who in 2014 paid $1.2 trillion in taxes--benefit in an amount much greater than any possible amount the Treasury could collect from a misguided new tax imposed on credit unions," Nussle wrote in CUNA's letter of strong support for the preservation of the credit union tax status. "If credit unions were taxed in 2014, the receipts would have accounted for only 0.05% of 2014 federal government spending--an amount that would have funded U.S. government operations for five hours."
On the other hand, Nussle underscored, benefits to credit union members and other consumers resulted in an estimated $10 billion in savings in 2014 alone, according to CUNA research. Approximately $8 billion was saved by credit union members through lower fees, lower rates on loans and higher yields on deposits, and another $2 billion was saved by bank customers due to credit unions' effect on the financial services market.
The $10 billion is a "relatively subdued" number, according to CUNA, because of the unusually low level of most interest rates during 2014. Prior to the financial crisis, combined member and non-member benefits totaled more than $12 billion annually, and CUNA believes those levels will likely be achieved again when interest rates rise.
Credit unions' tax status, as not-for-profit financial cooperatives, has also been affirmed several times in the past 100 years, including in 1937 when Congress made the status clear in statute, and 1998, when Congress passed the Credit Union Membership Access Act.
It is also made clear in several sections of the Internal Revenue Code, and was re-affirmed by the Internal Revenue Act of 1986.
Nussle also highlighted many other benefits associated with credit unions' cooperative model, including:
Credit unions' lower risk profiles allowed them to continue lending throughout the financial crisis. During the collapse of the secondary mortgage market in 2007, credit union-originated first mortgages rose by 11% in 2007 and 18% in 2008;
From the start of the financial crisis in June 2007 to December 2014, small business loans outstanding at credit unions grew by 90.8%, while such loans at banks declined by 12%;
Fees collected by credit unions on low-balance checking accounts average $80 per year, less than a third of those collected by banks;
More than half of credit union members relying primarily on credit unions for financial services have incomes of between $25,000 and $75,000 per year; and
Across the country, 49% of credit union branches are located in Community Development Financial Institution investment areas, compared to 42% of bank branches in such locations.
Nussle added that a loss of the credit union tax status would have a devastating impact on consumers and the benefits they derive from credit unions: It would result in a significant number of credit unions converting to banks or liquidating, while also resulting in a decrease in access to financial services for many Americans.
"We are willing to discuss these matters further with the Working Group," Nussle stated.
The Thune-Cardin working group is one of five formed in January by Senate Finance Committee leadership. The bipartisan groups are intended to spur congressional comprehensive tax reform efforts in the 114th Congress.