February 12, 2021

4 things to know this week

Capitol HillNAFCU's widely-read NAFCU Today is credit union leaders' go-to source for the latest on issues impacting the credit union industry. For those short on time, here's a roundup of this week's top need-to-know news, including insights into NCUA Chairman Todd Harper's webinar on priorities, details on the IRS' final rule related to taxing executive compensation, and more.

Harper discusses liquidity issues, NCUSIF premium, more

During a webinar Thursday, NCUA Chairman Todd Harper further detailed his priorities for the agency and its 2021 supervisory priorities and was joined by agency senior staff to review economic and credit union industry trends, risks, exams, and more. For those unable to attend the webinar live, it will be made available on-demand and the powerpoint from the presentation is available here.

On credit unions' increased asset growth in the past year and liquidity concerns, Harper highlighted the steps NCUA has taken to address it so far, including easing capital requirements related to paycheck protection program (PPP) loans, field of membership rules, expanded access to the Central Liquidity Facility (CLF), and the phase-in plan for the current expected credit loss (CECL) standard. He also pointed to the NAFCU-supported capitalization of interest proposal as it would make it easier for credit unions to restructure loans for members facing financial difficulties, and staff is monitoring the impact of additional stimulus passed by Congress on net worth ratios to see if additional action is needed.

While Harper has cautioned credit unions about the need to charge a National Credit Union Share Insurance Fund (NCUSIF) premium, he said the NCUA is waiting to finalize the equity ratio – there will be a presentation at next week's board meeting – before deciding next steps. NAFCU has urged the agency to not assess a premium and instead provide credit unions with additional investment authorities to address share growth.

The agency's Memorandum of Understanding (MOU) with the CFPB was also discussed and the agency indicated it won't change either's approach to enforcement, but will make exams more efficient as they will increase collaboration and share more information for when exams will occur.

FCUs exempt from tax on executive compensation, for now

NAFCU sent member credit unions a Final Regulation alert Thursday detailing the IRS' recently-finalized rule related to section 4960 of the Internal Revenue Code (IRC) related to executive compensation and parachute payments. NAFCU flags that while all credit unions are considered applicable tax-exempt organizations under the final rule, federal credit unions exempt under section 501(a) of the IRC are exempt from paying the tax owed under section 4960, until further guidance.

State-chartered credit unions, as well as some credit union service organizations (CUSOs), may be required to pay an excise tax on the top five highest-compensated employees on excess remuneration greater than $1 million, or excess parachute payments in an applicable tax year. In addition, federal credit unions may be subject to these taxes under section 4960 upon further guidance from the IRS; it is NAFCU’s understanding that the IRS is currently working on this guidance regarding the applicability of the tax to federal credit unions.

This issue stems from the Tax Cuts and Jobs Act. NAFCU has consistently advocated with Congress and the IRS to address the issue and seek relief for credit unions from this new tax imposed on certain not-for-profits. Access the Final Regulation for more details here. Relatedly, the filing season for 2020 taxes opens today.

2020 HMDA data due March 1

The NCUA sent a Regulatory Alert to credit unions this week reminding those subject to Home Mortgage Disclosure Act (HMDA) requirements in 2020 that they must submit data to the CFPB by March 1. Credit unions located in metropolitan areas that engage in certain types and volume of residential mortgage lending, and that had assets exceeding $47 million as of Dec. 31, 2019, must file a report this year on mortgage loan applications received during 2020.

The CFPB has a chart available to determine if institutions are required to submit data, and the NCUA reminded credit unions of the change in closed-end mortgage loan threshold; those that originated fewer than 100 covered closed-end mortgage loans in 2018 or 2019 are not required to report any closed-end mortgage loan information for 2020.

The NCUA provided additional details for the data submission process and reminded covered credit unions that delinquent filings could subject them to civil money penalties. NAFCU has several HMDA-related resources available online.

House Financial Services Committee advances COVID relief provisions

The House Financial Services Committee wrapped up its markup of coronavirus relief provisions as part of the budget reconciliation process Thursday. Several dozen amendments were considered during the two-day markup; one amendment was adopted and would set aside $500 million within the SSBCI for the smallest businesses with a focus on businesses with fewer than 10 employees. The legislation also includes some NAFCU-supported provisions:

  • an additional $25 billion for emergency rental assistance;
  • $9.961 billion to states, territories, and tribes to help households with mortgage payments and other housing costs; and
  • $10 billion to the State Small Business Credit Initiative.

Ahead of the markup, NAFCU reiterated provisions to include that would provide credit unions with access to additional tools to better serve members facing financial hardships amid the coronavirus pandemic.

The House Ways and Means Committee advanced its provisions yesterday to provide additional direct payments to consumers and families, an extension and increase to federal unemployment benefits, and adjusting some tax credits to further support families and workers, and the House Small Business Committee advanced its proposals Wednesday, which include:

  • expanding PPP eligibility and increasing program funding;
  • allocating $15 billion for the Targeted Economic Injury Disaster Loan (EIDL) Advance program;
  • providing $25 billion for a new program at the SBA offering assistance to restaurants and other food and drinking establishments;
  • providing an additional $1.25 billion for the SBA Shuttered Venue Operators Grant Program;
  • appropriating $840 million for administrative costs to prevent, prepare and respond to the COVID–19 pandemic, including expenses related to PPP, aid to Venues, and grants to restaurants;
  • funding $460 million for the disaster loan program; and
  • allocating $25 million for SBA’s Office of Inspector General for oversight, to remain available until expended.

NAFCU will continue to advocate for credit union priorities, and keep members informed as legislation is advanced.