ST. PAUL, Minn. (8/20/12)--The Minnesota Credit Union Network (MnCUN) says banks are stepping up their challenges to credit unions' tax-exempt status, using state newspapers as a forum. MnCUN has been actively participating in an exchange of letters to the editor to counter banks' claims about credit unions' tax-exempt status.
Joe Witt, president/CEO of the Minnesota Bankers Association, wrote an Aug. 1 letter to the Brainerd Dispatch calling for a re-examination of Minnesota credit unions' tax-exempt status.
In essence, Witt claims credit unions no longer are honoring their mission of serving "people of modest means," which garnered them an income-tax exemption back in the 1930s. Rather, credit unions now are abandoning that mission and focusing on wealthy customers, and placing branches in middle and upper income areas, he wrote.
MnCUN president/CEO Mark D. Cummins countered with an Aug. 6 letter to the editor of the Dispatch.
"In 1937, Congress exempted credit unions from federal income taxes because they are non-profit, democratically controlled cooperatives that return earnings to the people they serve," Cummins wrote. "In fact, Congress encouraged the success of credit unions to, among other things, foster the development of a system of financial cooperatives that would serve as a valuable alternative to the for-profit banking system.
"Credit unions' tax exemption was deliberated, reviewed and reaffirmed by Congress in 1951 and again in 1998. Since credit unions' structure has not changed, the reasons for the affirmation of credit unions' tax-exempt status are as valid, if not more valid, today," Cummins said.
Cummins went on to mention how credit unions' tax exemption benefits consumers.
"As organizations owned by members, any benefits credit unions receive from their tax-exemption status are passed onto those they serve," Cummins wrote. "These benefits are given in the form of fewer fees, lower rates on loans and higher savings rates. Therefore, a tax on credit unions would reduce the financial savings they can pass onto everyday consumers. In reality, this tax would be a tax on consumers.
"The substantial savings Minnesota credit unions provide to consumers far outweighs any revenue that would be raised by taxing credit unions," he added.
Cummins' letter prompted an Aug. 8 letter to the Dispatch from Mike Riley, CEO of Bremer Bank in Brainerd. Riley argued that although credit unions' assertion that they pass savings accrued from their tax-exempt status on to members may be true, that model doesn't hold up and isn't relevant if it were applied on a large scale to all deserving businesses--and the negative impact that would have on government programs.
"But there's a problem with that model. If businesses no longer paid taxes, who would pay for the government programs we all use and need?" Riley wrote.
Chuck Albrecht, president/CEO of Mid-Minnesota FCU in Baxter, responded to Riley regarding credit unions' relevancy with an Aug. 14 letter to the Dispatch.
" … There are more than a few reasons that support the relevancy of credit unions," Albrecht wrote. "If every teacher, waitress, firefighter, [and] everyday consumer joined a credit union, they could save, on average, more than $100 per household annually. They would also be offered financial counseling and other financial aid and education programs at no cost.
"Credit unions' not-for-profit model benefits all consumers in that it helps to keep the financial marketplace in check. Imagine how high banking rates and fees could climb if turning a profit, rather than serving consumers, became the bottom line?" Albrecht concluded.
To read the letters, use the links.