WASHINGTON–In a victory for credit unions, the tax package that will be begin mark-up tomorrow in the House Ways & Means Committee does not include revoking the CU tax exemption.
Indeed, according to one person, the words “credit union” do not appear anywhere in the text of what is called the “One Big, Beautiful Bill.”
After months of significant concern, worry and lobbying by the credit union trade associations that the nearly 90-year-old credit union tax exemption would be axed as Congress seeks ways to pay for extending the 2017 tax cuts, credit unions had begun to feel more comfortable in recent days after a draft of the bill before House Ways & Means was released on Friday and did not include removing the tax exemption.
Now, they’re feeling even better.
“Nowhere the bill is there any reference to ‘credit unions,’ ‘federal credit unions,’ or 501(c)(14) tax-exempt entities,” said Jason Stverak, DCUC chief advocacy officer, said in a statement. “There are no proposed changes to the Internal Revenue Code that would affect the credit union tax-exempt status, nor does the bill introduce Unrelated Business Income Tax (UBIT) provisions or modifications to NCUA oversight.”
Nevertheless, both America’s Credit Unions and the Defense Credit Union Council said they remain wary of any amendments that could affect the tax exemption being added to the bill in the committee or at a later point in Congress.
‘Recognizing the Value’
“America’s Credit Unions thanks Chairman Jason Smith and the House Ways and Means Committee members for recognizing the value of protecting the credit union tax status in their proposed reconciliation bill,” Jim Nussle, president and CEO of America’s Credit Unions said in a statement. “Together with leagues, credit unions, and industry partners, we have worked hard to show the impact credit unions have on their 142 million members and communities. We remain engaged with the committee as it considers amendments through the markup process to ensure no new tax is added on credit unions. Credit unions are here to strengthen Main Street, and we will keep our momentum.”
Two-Prong Strategy
The success in keeping the tax exemption out of the bill was part of a two-pronged approach that Nussle has outlined previously: “Stay Out” and “Get Out.”
“Stay Out” as been the primary focus of efforts for more than six months as the focus was on staying out of any bill in Congress. Should the tax exemption be included in a future amendment, the focus will move to “get out.”
“We may have to work to get out of a future provision or a future amendment, let’s say in the Senate,” said Nussle, who served on the Ways & Means Committee while he was in Congress. “We’re not done, We’re not going to take our eye off the ball at all. I’ll confess I have a difficult time when credit unions or anybody for that matter wonders why we spend so much time working on defense, and in this instance, defense is offense. You can score on defense and I believe if we’re able to stay out of this tax bill, that will be a score on defense.”
‘Locked & Loaded’
In response to a question from the CU Daily, Nussle said that should elimination of the CU tax exemption be included as part of an amendment, the organization has a response “locked and loaded…if in fact we need to strip a provision out of the tax bill involving credit unions We believe we have the sponsors and we believe we have the votes.”
Nussle credited the various state leagues in states that are home to members of Ways & Means for their work on the issue.
He added that he knows from experience that for all the work involved in staying out of a bill it’s even harder work to get out “once you’re in a bill or in a vehicle that’s moving.”
‘Credit Unions Delivered’
“I think this is the moment to say it—credit unions delivered,” said Nussle. “I mean, my goodness, the amount of outreach and engagement by credit union members, by team members at credit unions, by boards of directors, by leagues–every single one of them seems to have done something this year. Some have done outreach to members that they’ve never done before in order to help deliver the message of the credit union difference and to say ‘don’t tax my credit union.”
According to America’s Credit Unions, as part of the “Don’t Tax My Credit Union” campaign, it and its representatives:
- Met with every Republican member of the House Ways & Means Committee, including Chairman Jason Smith several times
- Met with the White House National Economic Council, Office of Management and Budget, and Treasury Department on five occasions
- Met with Senate Majority Leader John Thune, Speaker of the House Mike Johnson, House Majority Leader Steve Scalise, Senate Finance Committee Chairman Mike Crapo, House Financial Services Committee Chairman French Hill
- Generated more than 771,000 grassroots letters directly to lawmakers
- Contacted all 535 Congressional offices with key data on the credit union difference
- Placed several op-eds and LTEs, at the national and local level, to raise awareness of credit unions’ impact on their members and communities
- Commissioned an independent economic study on the national and consumer benefits of the credit union tax status
- Launched digital ad campaign targeting key tax writers and congressional leaders that has generated more than 73 million ad impressions and engaged over 100,000 activists
Nussle added that credit unions have earned and continue to earn the tax status.
What Is in Bill
According to DCUC, the current legislation primarily focuses on extending provisions from the 2017 Tax Cuts and Jobs Act (TCJA), including:
- Enhancements to 529 education savings plans and tax credits
- Individual tax rate reductions
- Expansion of the child tax credit
- Deductions for overtime and tipped income
- Increased Qualified Business Income (QBI) deduction
Potential Risks Ahead
Looking beyond the Ways & Means Committee at what else is occurring or could occur in Congress, Nussle said America’s Credit Union is monitoring some provisions that could create blanket challenges for other not-for-profit organizations.
“But we believe that the impact of our advocacy will be able to prevent us from being swept into that as well,” said Nussle. “What we’re looking at already is how to continue the drum beat for financial services and additional provisions that we’ve been working on all year.”
Avoiding Becoming Sausage
Similarly, DCUC’s Stverak said the organization will remain vigilant regardless of the Ways & Means Committee’s language so far.
“This is just the continual process of the legislative sausage-making,” said Stverak. “My worry is, as it always has been, that at 2:00 in the morning somebody decides they need to go find $30 billion or $50 billion and they add the credit union tax exemption…We’re going to continue to keep working and educating every office to ensure it’s not snuck in at the last minute. It helps to lay that continual groundwork of education so in the future we don’t have to make this round of investment in time, treasure and talent to protect the credit union tax exemption, because (congressional) members know and understand and have seen the united front of opposition to this idea.”
Added DCUC President and CEO Tony Hernandez in a statement, “As we’ve seen in the past, harmful provisions can be added at the last minute, sometimes in the dead of night. That’s why we are staying engaged with every step of the process — from markup to floor debate — and working in lockstep with leagues, member credit unions, and the broader ‘Don’t Tax My Credit Union’ coalition to ensure policymakers fully understand the critical value our institutions bring to the communities we serve.”
About the Tax Exemption
How did the credit union tax exemption come to exist in the first place? The CU Daily has the interesting history here.
