WASHINGTON–The banking industry is reportedly circulating a letter on Capitol Hill seeking a member or members of Congress to sign on to a letter asking Treasury to require federal credit unions to disclose more information around their operations, including compensation.
The letter was provided to the CU Daily by a Capitol Hill source and is marked as a “draft” and unsigned.
The letter urges Treasury Secretary Scott Bessent and Treasury to “reconsider” the regulatory exemption that permits Federal credit unions to forgo the disclosure and transparency requirements outlined in Section 6033 of the Internal Revenue Code, which mandates that most tax-exempt organizations must file an annual information return with the Internal Revenue Service (IRS), typically a Form 990, Return of Organization Exempt from Income Tax, or a variation like Form 990-EZ or Form 990-PF.
It requires organizations to report detailed financial data and information on their operations, governance, and compensation of key personnel to ensure transparency and compliance with tax laws.
The bankers’ letter states that Section 6033 was enacted by Congress to ensure that organizations granted the benefit of exemption from taxation are transparent and accountable to the public.
It’s Not 1971 Anymore
“Under the statute and relevant regulations, an organization exempt from taxation under section 501(a) is required to file an annual return on Form 990, on which the organization reports on its finances, governance, officer compensation, and general tax compliance,” reads the letter reviewed by the CU Daily. “Nearly all tax-exempt organizations, including, for example, state credit unions, foundations, charities, and institutions of higher education, file Form 990. However, in 1971, a change to the Treasury Regulations under Section 6033 exempted federal credit unions from this disclosure.”
The letter states that in 1971 FCUs were small, local institutions with small balance sheets, but they have since grown in size and sophistication.
“These institutions play an important role in serving their members, but their size and scope have also made them among the nation’s largest tax-exempt organizations,” the letter reads. “…Congress concluded that experience of the past two d e c a d e s indicated that more information is needed on a more current basis from more organizations and that this information should be made more readily available to the public…”
Exemption for Some CUs is Suggested
The letter goes on to say federal credit unions are not required to make certain disclosures that apply to nearly all other tax-exempt entities, including small community charities.
“We believe that enhancing transparency for larger federal credit unions would serve the public interest and align with the principles that already apply to state-chartered credit unions and other tax-exempt organizations,” the letter reads.
The letter further suggests that to reduce the burden on small FCUs from the Form 990 disclosure requirement that federal credit unions below $1 billion in assets be exempted.
