Removing Barriers Blog

President Biden Releases Proposed Fiscal Year 2022 Federal Budget
Posted May 28, 2021 by CUNA Advocacy

Today, the President delivered the remainder of his Fiscal Year 2022 budget to Congress. The Administration’s budget is an explanation of its spending priorities and does not have the force of law.

Perhaps the most consequential item in the budget for credit unions includes new reporting requirements for financial institutions. In an effort to increase taxpayer compliance, these new reporting requirements, beginning in 2023, are estimated to increase federal revenues by $463 billion over ten years. The Administration’s FY 2022 budget proposes the creation of a new and comprehensive financial account information reporting regime. Banks, credit unions, and other entities would be required to annually report to the IRS the gross inflows and outflows of account holders (businesses and individuals) with a breakdown for cash, transactions with a foreign account, and transfers to and from another account with the same owner. These requirements would apply to savings, transactional, loan, and investment accounts. A de minimis exception would exempt accounts with gross flow threshold of $600. Payment settlement entities would also be required to collect Taxpayer Identification Numbers and file a revised Form 1099-K expanded to all payee accounts (except de minimis amounts), reporting not only gross receipts but also gross purchases.

The president’s budget always has a section, as required by law, in which Treasury rescores all tax expenditures, including the ten-year cumulative “cost” of the credit union “tax expenditure.” Basic scoring off the tax expenditure is the credit union movement’s retained earnings multiplied by the corporate income tax rate. In the 2017 tax reform law, the corporate rate was lowered from 35% to 21%. The score for the credit union tax expenditure is $2.1 billion in 2021.

The budget sent to Congress recommends an $60 million increase in funding for the Community Development Financial Institutions (CDFI) Fund in FY 2022. This is a large increase from the enacted level of $270 million last year.

CUNA has worked with Congress and our system partners to increase CDFI funding. This fund makes capital grants, equity investments and awards for technical assistance to community development financial institutions (CDFIs). Examples of CDFIs include community development banks, community development credit unions, community development loan and venture capital funds, and microenterprise loan funds. CDFIs are required to provide a 1:1 match for most of the awarded funds, which are offered on a competitive basis. CDFIs finance community development initiatives such as small businesses, community facilities, and low-income housing.

CUNA is also requesting $330 million for the CDFI Fund in FY 2022.

The president’s budget submission also requests the $2 million for the NCUA’s Community Development Revolving Loan Fund (CDRLF).

CUNA has worked with Congress and our system partners to maintain and increase CDRLF funding. The NCUA successfully administers the Community Development Revolving Loan Fund program (CDRLF), which is used to provide low-interest loans and technical assistance grants to low income designated credit unions. It was created in 1979 and transferred to NCUA administration in 1986. The Community Development Revolving Loan Fund (CDRLF) was established by a $6 million appropriation to assist credit unions serving low-income communities to: 1) provide financial services to their communities; 2) stimulate economic activities in their communities, resulting in increased income and employment; and 3) operate more efficiently. CDRLF funds a revolving loan program and a technical assistance program. Since FY 2001, Congress has recognized the importance of CDRLF, and has provided annual appropriations for the program. The CDRLF usually receives requests that greatly exceed available funds.

As of September 30, 2020, the CDRLF had outstanding loans of $6.8 million (22 loans outstanding to 21 credit unions). Last year, the NCUA awarded $2.6 million in technical

assistance grants to help 302 low-income credit unions provide affordable financial services to their members and communities during the COVID19 pandemic.

CUNA is also requesting $3 million for the CDRLF in FY 2020, an increase of $500 million over FY 2020.

The Small Business Administration’s (SBA) 7(a) loan program allows the agency to guarantee up to 85% of a loan. For credit unions, this means the SBA-guaranteed portion of a member business loan does not count against the statutory cap of 12.25% of assets. The SBA’s 504 loan program provides long-term, fixed-rate financing for major fixed assets, such as equipment and real estate. For FY 2022, the Administration’s budget proposes an SBA Section 7(a) loan program maximum loan limit of $30 billion, the same as FY 2020. The budget also proposes an SBA Section 504 Loan Program maximum loan limit of $7.5 billion, the same as FY 2020.

The Cooperative Development Program (CDP) is essential to furthering the worldwide development programs at the World Council of Credit Unions (WOCCU). In FY 2020, the program received $18.5 million in funding. In the FY 2022 Presidential request, the same amount is requested for FY 2022.

Regarding guarantee fees charged by Government Sponsored Enterprises, existing law requires that Fannie Mae and Freddie Mac increase their annual credit guarantee fees on home mortgage acquisitions between 2012 and 2021 by an average of at least ten basis points. A mortgage acquired during this period will be subject to the fee while the loan remains outstanding. The Administration budget does NOT include a request that this fee apply to loans acquired after the October 1, 2021 sunset date. However, the proposed budget does assume the fees will apply for the life of the loans acquired prior to the sunset. In addition, the Administration does not include any proposals for ending the twelve-year conservatorships of Fannie Mae and Freddie Mac.