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Community banking trade group details priorities for 2023, taking aim at “outmoded” CU tax subsidy.
As the new Congress begins, the perennial battle between banks and credit unions over the credit union tax exemption has flared anew.
The Independent Community Bankers of America has sent a letter to Capitol Hill and took out a full-page ad in Politico, a newspaper that circulates in Washington, to outline its priorities for the year ahead.
“ICBA urges Congress to restore balance to the American financial services marketplace and help close the growing budget deficit by re-examining the justification for the outmoded, 100-year-old credit union tax subsidy,” the trade association said in its policy agenda.
The group goes on to accuse “today’s behemoth, growth-oriented credit unions” of leveraging their tax exemption to purchase tax-paying community banks.
The ICBA also called for the creation of targeted tax credits or deductions for community bankers to lend to low- and moderate-income people and businesses to help offset both the credit union tax exemption and one that the Farm Credit System lenders also receive.
Pushback From Credit Union Groups
In response, Brad Thaler, NAFCU’s vice president of legislative affairs, sent his own message to Capitol Hill, noting that banking groups fail to disclose the banking industry receives tens of billions of dollars in annual tax breaks.
“They also fail to point out that nearly one-third of all banks are Subchapter S corporations and do not pay corporate income taxes,” Thaler wrote. “These annual tax breaks for banks far outpace the annual tax expenditure of the credit union tax exemption. They also do not take into account how the credit union tax status provides benefit to the economy at large.”
CUNA has made similar arguments and is likely to emphasize its position when its annual Governmental Affairs Conference convenes later this month.
Where Priorities Overlap
While no legislation eliminating or limiting the credit union tax exemption has been introduced for the past several years, the two sides nonetheless resume their fight each Congress.
Ironically, however, the other items in the ICBA’s advocacy agenda are remarkably similar to those being pushed by credit union trade groups.
For instance, the ICBA has called for legislation to block or amend the CDFI Fund’s revisions to its application and certification processes, contending that they would harm low-income communities served by CDFIs. Credit union trade groups have made the same recommendation.
The trade group also recommends that Congress enact legislation that would provide financial institutions with a regulatory safe harbor if they provide financial services to marijuana-related businesses. Credit union trade groups also have pushed for similar legislation.
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