Credit Union Magazine - January 2009 - (Page 55)

Ñ INITIATIVES Ñ SERVICES Ñ EDUCATION LEAD STORY CUs Obtain Tax Exemption Credit unions obtained their tax exemption from Congress on June 15, 1937, in an amendment to the Federal Credit Union Act of 1934—with little difficulty or fanfare. It was enacted that December. The Bridge, forerunner of Credit Union Magazine, briefly recounts: “In its original form the Federal Act permitted the taxation of Federal credit unions and their property in the manner and at not to exceed the rate imposed upon state banks. This proved unsatisfactory for the reason, among others, that state banks are often taxed on the basis of their share capital, which represents only a small part of their working funds, and Federal credit unions, whose working capital is made up almost entirely of shareholdings, were thus subject to an unduly high rate, particularly as compared to state-chartered credit unions. “The amended Act exempts Federal credit unions from all taxation, local, state, or Federal, except the usual taxes on real estate and tangible personal property. Members of Federal credit unions, moreover, are still subject to taxation on their holdings.” The Credit Union National Association (CUNA) received credit for the law’s passage in the District of Columbia League News newsletter of January 1938. Still tax-exempt Credit unions remain tax-exempt, while mutual savings banks and savings and loan associations (S&Ls) didn’t. “Origin of the tax exemption,” a 1989 report from the CUNA archives, relates: “The legislative history of the Revenue Act of 1951 suggests that mutual savings banks and S&Ls lost their tax exemptions because they departed from the principles and purposes of their formation. For example, mutual savings banks were begun to encourage thrift and establish a safe place for savings. They were to serve factory workers and other wage earners of moderate means who had no other place to deposit their savings. But by 1951, Congress viewed mutual savings banks to be in active competition with commercial banks and life insurance companies for the public savings, and competing with cuna.orgÉ many types of taxable institutions in the security and real estate markets. “As for S&Ls, a Senate report stated that they ‘are no longer self-contained cooperative institutions as they were originally organized. There is relatively little difference between their operations and those of other financial institutions which accept deposits and make real estate loans.’” Two other reasons for the loss of the mutual thrift A 1937 ad highlights why CUs have maintained their tax-exempt status since tax exemption were cited in a 1989 1937: Democratically run, they provide resources for ordinary workers. CUNA paper: u The government’s Union Association of unceasing appetite for tax New York. revenues, as the responsiOne of a package of bilities of the federal 66 bills signed, the bill government increased exempts state-chartered over the years; and credit unions from the u Pressure especially special additional mortfrom commercial banks, gage recording tax beginwhich lobbied against the ning in 2010. The new tax exemption. law levels the field with federal credit unions, says In the news even now the association. Credit unions’ tax status For more resources, visit cuna. still makes headlines. org/100years/. Last September, New York Gov. David A. Paterson signed the Special Additional Mortgage Recording Tax bill. It exempts state charters from a mortgage tax, according to the Credit JANUARY 2009É CREDIT UNION MAGAZINE 55 http://www.cuna.org/100years http://www.cuna.org/100years http://www.cuna.org

Table of Contents Feed for the Digital Edition of Credit Union Magazine - January 2009

Credit Union Magazine - January 2009 Contents On My Way Leading Edge Spotlight President's Perspective Game Plan Washington Insider Wright Stuff Executive Suite Reverse Mortgages Come of Age Six Merger Myths Leading-Edge Lenders TwentyFour/Seven Bankruptcy Compliance Tools of the Trade Trendlines Rates & Ratios Council Corner Shoptalk System Scan Marketplace Branching Out Advertiser Index

Credit Union Magazine - January 2009

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