A majority of Americans support a Congressional investigation into whether credit unions should remain tax-exempt, according to polling data released March 4 by the Independent Community Bankers of America.
Fifty four percent said Congress should investigate whether CUs should still be tax-exempt, according to the poll, which was conducted by Morning Consult. Only 21 percent were aware that CUs were tax exempt, while 68 percent thought they were a type of bank, which the ICBA said reflects the lack of public awareness of Congressional limits placed on CUs to justify their tax-exempt status.
Other polling results signaled broad support for CU and bank standards to align. Sixty-eight percent of adults, including 73 percent of Democrats and 72 percent of Republicans, say CU customers should enjoy the same protections that banks provide. Seventy-three percent of adults — 80 percent of Democrats and 76 percent of Republicans — support the idea of CU customers having the same levels of protection against illegal discrimination as bank customers.
The polling was undertaken as credit unions continue to acquire banks at a relatively rapid pace. A record 16 CU-bank acquisitions were announced in 2022, according to the American Bankers Association.
Three CU-bank buys have been announced this year in the Upper Midwest. Oshtemo, Mich.-based Advia Credit Union announced in January that it plans to further expand in Illinois by acquiring Chicago-area NorthSide Bank. Also in January, Wabash, Ind.-based Beacon Credit Union announced its pending acquisition of Salem, Ind.-based Mid-Southern Savings Bank; and Moline, Ill.-based Empeople Credit Union announced its pending acquisition of Lomira, Wis.-based TSB Bank.
“As credit unions increasingly use their taxpayer subsidies to finance acquisitions of community banks — with each deal displacing a source of credit in local communities and increasing the portion of the industry exempt from the Community Reinvestment Act — Congress should hold hearings to investigate credit union practices and reconsider the credit union tax exemption, which lawmakers haven’t done since the policy was enacted 90 years ago,” said ICBA President and CEO Rebeca Romero Rainey.
Last week, the American Bankers Association and 52 state bankers associations also expressed support for a Congressional hearing to determine whether the tax-exempt status of credit unions is still justified. The letter was sent to House Committee on Ways and Means Chair Jason Smith (R-Mo.) and Senate Committee on Finance Chair Ron Wyden (D-Ore.) along with House Committee Ranking Member Richard Neal (D-Mass.) and Senate Committee Ranking Member Mike Crapo (R-Idaho).
“Credit union growth, while theoretically positive for the communities credit unions serve, is only beneficial if it is accompanied by congressional oversight and careful regulatory supervision that accounts for the potential consequences of that growth on the credit union model,” according to the trade groups.
Legislators have been slow to address the disparities as banks continue to report record profits and the general public hasn’t felt disadvantaged, noted United Bankers’ Bank President & CEO Dwight Larsen.
Larsen said banking trade groups will likely need to show that the tax-exempt status of credit unions is causing financial harm to consumers; the general public, including municipalities, and the financial system before the federal government considers ending the tax exemption. As more credit unions acquire banks, the loss in revenue from tax-paying banks could also attract more attention, Larsen added.
The nonpartisan Tax Foundation has urged policymakers to end the tax exemption. In a Jan. 30 report, President Emeritus Scott Hodge cited the recent CU-bank acquisitions, their reduced common-bond and field-of-membership restrictions, and uncertainty over their commitment to members of modest means.
“Fairness and equity demand that credit unions be put on the same tax footing as the banks they compete with,” Hodge said. “In an era of $2 trillion deficits, subsidizing credit unions is a luxury taxpayers can no longer afford.”