The NAFCU Journal May - June 2017 - 12

INSIDE NAFCU

The Taxing Issue of Taxing Credit Unions

T

he Federal Credit Union Act of
1934 states that credit unions,
as "mutual or cooperative
organizations operated entirely
by and for their members," shall be
exempt from federal corporate income
tax. This was affirmed by Congress in
1998 under the Credit Union Membership Access Act. Even so, critics today
argue that credit unions in 2017 are
no different than banks and, therefore,
should bear similar tax responsibilities.
(Clearly, credit unions do pay taxes
and fees, including payroll and property taxes.)
Preserving the credit union tax exemption is NAFCU's No. 1 priority. In support of that effort, the association early
this year published a new, independent
study that illustrates the impact of the
exemption on consumers, businesses and
the overall economy.

The study is authored by Robert Feinberg,
Ph.D., professor of economics at American University; and Douglas Meade,
Ph.D., director of research at Interindustry Economic Research Fund Inc.
Comparable studies in Canada and
Australia have shown that equivalent
changes to the credit union tax status
caused a number of credit unions to
close, which in turn led to higher interest
rates on loans and lower interest rates
on deposits for consumers, due to the
overall reduced competition for financial
services. The NAFCU study suggests that
similar effects on U.S. consumers would
occur if the credit union tax exemption
were eliminated.
The credit union federal income tax
exemption offers wide-ranging benefits for
consumers and the broader marketplace.
12

For example, from 2006 to 2015, credit
unions outperformed banks (see the chart
below), with lower interest rates on loans
and higher returns on savings and deposits.
Going forward, the personal income taxes
paid on those higher returns is expected
to total $38 billion over the next 10 years,
a significant addition to the government's
budget that would disappear if the credit
union tax exemption were eliminated.
The exemption, the study points out, also

makes it possible for nearly 900,000 credit
union staff members to remain employed
in positions that would disappear without
it, as many credit unions would be forced
to close their doors.
Visit www.nafcu.org/cutaxexemption for
a two-page summary of the study's key
findings, or download the full report.

Chart 1: Interest rate differences, credit unions vs. banks
percent difference, 2006-2015 average
40%

32%
27%

20%

0%
-3%
-12%

-20%
-28%
-40%
Vehicle loans

Unsecured
Real estate
loans & credit
loans
cards

CDs, IRAs,
KEOGH

Checking,
savings, MMF

THE NAFCU JOURNAL MAY-JUNE 2017

Chart 2: Credit unions & bank consumer benefits by year
2006-2015, billions $


http://www.nafcu.org/cutaxexemption

Table of Contents for the Digital Edition of The NAFCU Journal May - June 2017

Our First 50 Years
Events Calendar
From the Chair
Inside NAFCU
The Digital Download
50 Ways to Grow Your Credit Union Professional and operational
Fields of Opportunity
2017 Annual Conference Exhibitor Directory
Getting to Know …
Management Insight
Compliance Central
Inside NAFCU Services
From the President’s Desk
The NAFCU Journal May - June 2017 - Cover1
The NAFCU Journal May - June 2017 - Cover2
The NAFCU Journal May - June 2017 - 1
The NAFCU Journal May - June 2017 - Our First 50 Years
The NAFCU Journal May - June 2017 - Events Calendar
The NAFCU Journal May - June 2017 - From the Chair
The NAFCU Journal May - June 2017 - 5
The NAFCU Journal May - June 2017 - Inside NAFCU
The NAFCU Journal May - June 2017 - 7
The NAFCU Journal May - June 2017 - 8
The NAFCU Journal May - June 2017 - 9
The NAFCU Journal May - June 2017 - 10
The NAFCU Journal May - June 2017 - 11
The NAFCU Journal May - June 2017 - 12
The NAFCU Journal May - June 2017 - 13
The NAFCU Journal May - June 2017 - The Digital Download
The NAFCU Journal May - June 2017 - 15
The NAFCU Journal May - June 2017 - 50 Ways to Grow Your Credit Union Professional and operational
The NAFCU Journal May - June 2017 - 17
The NAFCU Journal May - June 2017 - 18
The NAFCU Journal May - June 2017 - 19
The NAFCU Journal May - June 2017 - 20
The NAFCU Journal May - June 2017 - 21
The NAFCU Journal May - June 2017 - Fields of Opportunity
The NAFCU Journal May - June 2017 - 23
The NAFCU Journal May - June 2017 - 24
The NAFCU Journal May - June 2017 - 25
The NAFCU Journal May - June 2017 - 26
The NAFCU Journal May - June 2017 - 27
The NAFCU Journal May - June 2017 - 28
The NAFCU Journal May - June 2017 - 2017 Annual Conference Exhibitor Directory
The NAFCU Journal May - June 2017 - 30
The NAFCU Journal May - June 2017 - 31
The NAFCU Journal May - June 2017 - 32
The NAFCU Journal May - June 2017 - 33
The NAFCU Journal May - June 2017 - 34
The NAFCU Journal May - June 2017 - 35
The NAFCU Journal May - June 2017 - 36
The NAFCU Journal May - June 2017 - 37
The NAFCU Journal May - June 2017 - 38
The NAFCU Journal May - June 2017 - 39
The NAFCU Journal May - June 2017 - 40
The NAFCU Journal May - June 2017 - 41
The NAFCU Journal May - June 2017 - 42
The NAFCU Journal May - June 2017 - 43
The NAFCU Journal May - June 2017 - Getting to Know …
The NAFCU Journal May - June 2017 - 45
The NAFCU Journal May - June 2017 - Management Insight
The NAFCU Journal May - June 2017 - 47
The NAFCU Journal May - June 2017 - Compliance Central
The NAFCU Journal May - June 2017 - 49
The NAFCU Journal May - June 2017 - Inside NAFCU Services
The NAFCU Journal May - June 2017 - 51
The NAFCU Journal May - June 2017 - From the President’s Desk
The NAFCU Journal May - June 2017 - Cover3
The NAFCU Journal May - June 2017 - Cover4
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