Last year, we noted in a blog post that the banking lobby was asking Congress to repeal the federal corporate income tax exemption for credit unions. Although that effort hasn’t resulted in a repeal, Congress is still considering the option as part of comprehensive tax reform, and it’s a decision that could have a major impact on SAC Federal Credit Union and its members.
Background of credit union tax exemption
Credit unions function under charters that limit their ability to raise capital and make business loans. This system was created to provide financial services in a not-for-profit cooperative business model that depends on member ownership and member control, and that forms the basis for the tax exemption.
Credit unions are unique in the financial world because they operate for member benefit rather than profit. The banking lobby, which sees credit unions as competitors, is spearheading the campaign to remove the tax exemptions, and it’s important that credit unions and members fight back in order to preserve the spirit of a member-owned organization.
The case for exemption
“Tax exemptions are one of the ways credit unions are able to operate as a not-for-profit financial cooperative,” says Cynthia Buettner, SAC FCU’s Senior Vice President of IT, Marketing & Sales. “Because we aren’t trying to make money from our members, we can offer lower fees and better rates. We can continue to offer innovative products and services and improve the services we already offer our members.”
If those tax exemptions were removed, credit unions would be forced to operate like banks in order to stay afloat, which would mean a fundamental change in the business model. Right now, credit unions like SAC FCU return all excess income to members through:
- Higher deposit rates
- Lower fees
- Lower loan rates
If the credit union has to turn to a model similar to big banks, those benefits would be sharply reduced.
“Without the tax exemptions, some credit unions might not be able to offer the same standard of service that members look for, and the over 93 million Americans who depend on credit unions for affordable financial services would have to look elsewhere,” Buettner says.
What you can do
Show your support for the “Don’t Tax My Credit Union” campaign by visiting the Don’t Tax My Credit Union website or by sharing information via Facebook or Twitter, with the hashtag #DontTaxMyCU. Make your voice heard by reaching out to your representatives over social media or by email, so we can all keep the credit union tax exemption in place.
Check back for updates on the tax exemptions, industry news and free financial resources.