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May 16, 2012 – NAFCU's chief lobbyist on Tuesday warned lawmakers not to swallow the propaganda being spread by bankers about the credit union tax exemption – particularly in light of banks' ongoing use of federal funds to prop up their balance sheets and Subchapter S to avoid federal tax on income.

The bankers wrote lawmakers Tuesday urging that they turn back the tax exemption for the nation's non-profit, member-owned credit unions. Dan Berger, NAFCU's executive vice president of government affairs, responded with a letter to the leaders of a key House Ways and Means subcommittee that calls out the bankers for their falsehoods about credit unions when they themselves are leaning on taxpayers just to stay open.

"Despite what the banking trades may want you to believe, the institutional framework credit unions operate within is vastly different from that of banks and thrifts," Berger wrote. "Credit unions are not making daily $2 billion trades like the mega-banks. Credit unions are not-for-profit member-owned cooperatives. Every dollar earned at credit unions is returned to members . . . the differences between credit unions and others who operate in the banking sector extend far beyond tax treatment."

Writing Ways and Means Oversight Subcommittee Chairman Charles Boustany Jr., R-La., and Ranking Member John Lewis, D-Ga., Berger reminded that many for-profit banks "still rely on massive amounts of taxpayer funding in the wake of the financial crisis." For example:

• nearly 400 banks still struggle to repay Troubled Assets Relief Program funds, with no exit strategy on the table;
• 2,377 banks avoid federal tax on corporate income through Subchapter S of the federal revenue code;
• banks' subchapter S exemption was valued at an estimated $2.05 billion in 2010, more than the $1.27 billion attributed to the federal tax exemption for the entire credit union industry.

"While the banks are waiting for the next taxpayer giveaway, credit unions continue to do what they have always done – serve those within their field of membership who may otherwise be unbanked," Berger wrote. He added that, given the number of people affected, ending the credit union exemption "would be one of the largest tax increases in our nation's history."