Congress debates credit union tax exemption

Fake Credit Unions Should Pay Taxes

Last week, the House Ways and Means Committee voted to preserve the federal credit union tax exemption during the markup of the tax reconciliation bill. This, despite banking groups like the Independent Community Bankers of America advocating for lawmakers to end the federal tax exemption for credit unions with $1 billion or more in assets or to establish tax parity between credit unions and tax-paying community banks.

Friends of Traditional Banking has long called for mega credit unions with enormous assets and that no longer have the common membership bonds of traditional credit unions to pay taxes. See FOTB's video on "Fake Credit Unions" and FOTB's financial support for candidates like Rep. Randy Feenstra (R-IL). "I'm not afraid to call out the largest credit unions who are behaving like banks," Rep. Feenstra said. "Thanks to Friends of Traditional Banking, we can take the fight to them!"

America's credit unions are warning their members that their fight is not over. "Once the House Ways and Means Committee and other committees advance their portions of the budget reconciliation bill, the House Budget Committee will assemble the sections into a complete package that will then go to the House floor," they note. "The credit union industry will continue these unified advocacy efforts throughout the reconciliation process to ensure the Trump Administration and lawmakers recognize the value of and protect the credit union tax status in final legislation."

Banking leaders hope that Congress could still insert tax parity before the bill is finalized. “With credit union acquisitions of tax-paying community banks reaching a record high last year, the growing skepticism of credit unions’ tax and regulatory exemptions must evolve into policymaker action,” ICBA President and CEO Rebeca Romero Rainey said. “Eliminating the federal tax exemption for credit unions over $1 billion in assets will help ensure taxpayer dollars no longer tilt the competitive marketplace, subsidize community banking consolidation, and result in fewer choices for consumers and small businesses.”

BANKER NEWS BITS:

Friends of Traditional Banking gets a shoutout in the American Banker's coverage of "What banks should watch in the 'big, beautiful' tax bill." The story outlines some of the key pieces of the proposed legislation that would help agricultural lending and more.

In addition to support for the Access to Credit for our Rural Economy Act, or ACRE, the ABA Banking Journal reports that the bill includes a provision making permanent and enhancing the Section 199A pass-through deduction. It also has language to expand and extend the estate tax exemption, which would spare family-owned community banks and small businesses from the threat of having to liquidate or divest simply to generate liquidity to pay a tax bill. There is also language in the bill making permanent the preferential rates on global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII), and extending the current base-erosion and anti-abuse tax (BEAT) rates.

The Tampa Bay Business Journal noted the addition of veteran banker Rita Lowman joining the executive committee of Friends of Traditional Banking. They pointed out Lowman's depth of experience in the industry and that "Friends of Traditional Banking donated hundreds of thousands of dollars to bank-friendly candidates for federal office across the U.S. for the 2024 election."

BankingDive shares the news that "Friends of Traditional Banking Elects New National Leadership," pointing out Amada Alvidrez of Oklahoma as the new chair, and Greg Hayes of Pennsylvania as the new vice chair.

Trump signs resolution nullifying CFPB overdraft rule, reports the Consumer Finance Monitor. "Americans voted for consumer choice, not government overregulation,” said House Financial Services Chairman Rep. French Hill, R-Ark., who supported Trump having signed the resolution.

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Friends of Traditional Banking is a non-partisan grassroots effort organized by bankers in 2012 to improve the political and regulatory environment for the traditional banking industry in the U.S. FOTB is the inverse of a PAC--instead of spreading a little bit of money to a lot of campaigns, they focus a lot of money on a couple of key campaigns.