GLENDALE, Calif.–The profile of the credit union tax exemption, which will be under much heightened scrutiny this week in the House Ways & Means Committee, has gotten high enough it has begun appearing in numerous media reports across the country.
In addition to the dueling op-eds that have been published in numerous venues and publications, some TV stations have also picked up the story.
That includes in on one of the largest markets in the U.S., greater Los Angeles, where ABC reported Congress is considering “removing the tax exemption for credit unions to make cuts to the federal budget as part of new tax-reform legislation.”
To get the credit union perspective, the news station interviewed Michael Kim, CEO of the $366-million Eagle Community Credit Union in Foothill Ranch, Calif., along with a representative of the California CU League.
‘Significant Impact’
“For smaller credit unions, and even credit unions of our size too, it would make a significant impact on how we do business,” Kim told KABC, referring to the potential loss of the exemption.
Kim told KABC that tax exemption allows CUs to provide products that are especially important to underserved communities.
“We provide very similar products and services as a traditional bank,” he stated. “But unlike a bank that has shareholders and investors, our member owners are the owners of the credit union, and everything we earn in terms of profits or earnings goes back into our credit union.
“And they see that in the form of lower rates in loan products, higher rates in our deposit products.”
Study Cited
KABC cited a student from American University and the Interindustry Economic Research Fund that found, on average, credit unions are able to offer savings accounts with 66% higher interest rates than traditional banks, and real estate loans with interest rates that are 7% lower than traditional banks on average.
‘Devastating to Industry’
“If our credit union tax-exemption would go away, that would be devastating to the industry,” Stephanie Cuevas, a spokesperson for the California Credit Union Leagues, told KABC. “Right now we have a model where there’s for profit banks and not for profit credit unions, that creates competition. Take away the tax exemption, now credit unions are saying, ‘How are we going to balance our books?'”
Kim told KABC that some credit unions could be driven out of business if forced to pay a 21% federal income tax rate. The report can be viewed here.
