Removing Barriers Blog

New House Tax Legislation Affirms Credit Union Exemption
Posted January 08, 2016 by CUNA Advocacy

As the House of Representatives is finishing its first work week of 2016, we are delighted to see a new draft of comprehensive tax reform legislation authored by Congressman Devin Nunes (R-CA).  Nunes, a longtime supporter of credit unions, specifically reaffirmed the unique tax status of credit unions.  He is a long-serving member of the tax-writing House Ways and Means Committee.  His draft legislation, titled the American Business Competitiveness Act, will likely be introduced in the coming weeks as he seeks original cosponsors for the bill.  His draft legislation has been widely praised and mentioned as a possible vehicle to kick start the corporate tax reform legislative effort this year. 

We appreciate the stakeholder engagement the Congressman and his staff have displayed in the formulation of this legislation.  Preserving the credit union tax status is the top advocacy priority of CUNA, the leagues, and our member credit unions.  As such, our advocacy staff reached out to Congressman Nunes and his staff early last year and had several meetings where we explained in detail the legislative history and rationale for the current tax treatment of credit unions in the tax code. 

The Nunes draft legislation completely changes the method of taxation for financial institutions.  Had this tax treatment been extended to credit unions, it would have amounted to a tax on credit unions’ retained earnings-- but our staff explained that retained earnings are needed for regulatory capital and that credit unions have no source of supplemental capital to augment retained earnings. 

 This rationale, along with the public benefit that credit unions provide, led Congressman Nunes and his staff to reaffirm the credit union federal tax status in their draft.  We have joined the California/Nevada Credit Union League in saluting Congressman Nunes in his support for credit unions, as well as his commitment to reforming the federal tax code in a careful and deliberative manner.