WASHINGTON (6/28/12)—Sen. Sherrod Brown, in a letter to U.S. Treasury Secretary Timothy Geithner, said the federal credit union tax status continues to be as valid today as it was when it was first established by the U.S. Congress.
The Ohio Democrat's June 26 letter reminded that credit unions were initially exempted from federal taxation under the Federal Credit Union Act, because:
*They are cooperatives operated for and by their members; and
*Credit union shares are essentially members' deposits.
Brown added that Congress reaffirmed its tax decision regarding federal credit unions in 1998 and noted that it was because credit unions are "member-owned, democratically operated, not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means."
Brown told Geithner that these justifications are as true today as they were when Congress passed the law.
Credit unions, Brown wrote:
- Have deep roots in their communities;
- Are tight-knit organizations whose members are united by a common bond;
- Are made up of co-workers, colleagues, and neighbors who joingt together to become co-owners of 'true community institutions";
- Provide loans so small businesses can hire workers and export products to new markets; and
- Help make college more affordable for students, as well as provide financial education to help families plan their finances and save for the future.
Brown's endorsement of the credit union tax status comes at a time when the government is considering revisions to the country's tax code as Bush-era tax rates are set to expire on Jan. 1, 2013.
The tax-exempt status of credit unions has not been mentioned in any of the current reform discussions. However, preserving the credit union tax status is a top Credit Union National Association (CUNA) priority, and CUNA will remain engaged and vigilant as tax reform discussions move forward.