CUs reps on Hill for tax status and reg relief

WASHINGTON (10/25/05)—About 130 credit union representatives from at least 12 states will be in town this week making grassroots visits to federal lawmakers on areas of vital interest to the movement. The topics of the credit union tax status and of financial services deregulation will be the priority issues for discussions.

"We want to make it evident that credit unions care and are engaged," Richard Gose, senior vice president of political affairs for the Credit Union National Association (CUNA), said Monday of the credit union visits to Capitol Hill. He noted that more than 50 movement representatives called on federal lawmakers last week.

Of foremost concern to credit unions are efforts by Congress to find ways to fund a multi-billion dollar price tag attached to a growing federal budget deficit combined with costs associated with rescue and relief efforts executed in the aftermaths of Hurricanes Katrina and Rita..

CUNA has in recent weeks been monitoring and informing the movement about reports that the House Ways and Means Committee is looking at revoking a federal income tax exemption for not-for-profits—including credit unions—as one of many possible ways of defraying an estimated $50 billion in costs.

The Committee announced Monday that it has scheduled a November 3 hearing on credit unions.

According to CUNA's Research and Policy division, the $1.5 billion in tax revenue the government could raise by adding additional tax to credit unions would be more than wiped out by a negative $9.1 billion net annual economic impact of that action. CUNA research shows an estimated $6.3 billion decline in credit union member benefits would arise from change in tax status and subsequent operational changes, and an estimated annual decline in bank customer benefits of $4.3. billion would stem from greatly reduced influence of credit union competition.

Gary Kohn, CUNA's legislative affairs vice president, noted Monday that there is still big debate among lawmakers about how to fund the government's growing costs—that there is no agreement as yet regarding an approach. However, CUNA has told credit unions to be on alert, ready to do what is necessary to preserve the movement's tax status.

Also on the credit union grassroots agenda for this week is the topic of financial services regulatory relief scheduled for a House Financial Services Committee markup on Thursday.

CUNA and credit union representatives will continue working to get provision added to the Financial Services Regulatory Relief Act of 2005 (H.R. 3535) that would provide a risk-based formula for Prompt Corrective Action (PCA) and increase member business lending (MBL) limits for credit unions. Both of these issues are addressed in the Credit Union Regulatory Improvements Act (CURIA, H.R. 2317), considered by CUNA to be the keystone piece of legislation to modernize credit union regulation, but not in this broader-based bill.

"We continue our efforts to have as a minimum PCA reform included in the broader financial services bill the House committee is preparing to vote on—and we have not given up on member business lending limits," Gary Kohn said Monday. But, he added, the higher lending limit is "a long shot" and a PCA provision is "a long shot in itself."

"The Committee leadership thinks this bill should remain clean,' Kohn explained, saying members consider the bill "finely balanced" to avoid controversy that would impede its chances for passage this year.

CUNA supports the financial services regulatory relief bill, which carries the following benefits for credit unions:

  • Privately insured credit unions to become members of a Federal Home Loan Bank;
  • Leases of land on federal facilities for credit unions;
  • Investments in securities by federal credit unions;
  • An increase in general 12-year limitation of term of federal credit union loans to 15 years;
  • An increase in 1% investment limit in credit union service organizations;
  • Member business loan exclusion for loans to non-profit religious organizations;
  • Check cashing and money transfer services offered within the field of membership;
  • Voluntary mergers involving multiple common bond credit unions;
  • Conversions involving common bond credit unions;
  • Credit union governance;
  • Providing the NCUA with greater flexibility in responding to market conditions;
  • An exemption from pre-merger notification requirement of the Clayton Act; and
  • Treatment of credit unions as depository institutions under securities laws.
The bill also would streamline the process of filing currency transaction reports and suspicious activity reports as required by the Bank Secrecy Act. The bill would eliminate some privacy disclosure requirements when an institution's policies have not changed and when the institution does not share the personal information of consumers with third parties," according to the committee. The Senate has yet to unveil a regulatory relief measure but is expected to before yearend.

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Resource Links
Statement Stuffer: Why CUs are Tax Exempt
Related stories: 2005 Hearing on CU Taxation


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