McWatters to Hatch: Eliminating CU exemption would create issues
Removing credit unions' federal tax exemption "would almost certainly create a safety and soundness issue for the [National Credit Union Share Insurance Fund] that could ultimately fall to U.S. taxpayers," wrote NCUA Chair J. Mark McWatters in a March response letter to Senate Finance Committee Chairman Orrin Hatch, R-Utah.
McWatters was responding to a letter from Hatch sent to the NCUA in January outlining concerns that credit unions are evolving away from their original tax-exempt purpose and raising questions about recent changes to field-of-membership (FOM) rules.
"Federal credit unions continue to be member-owned, democratically operated, not-for-profit organizations that are managed by boards of directors that consist mostly of volunteers, and work primarily to meet the credit and savings needs of consumers of modest means," McWatters wrote.
McWatters provided a deep dive into the effects the elimination of the federal tax exemption could have on the NCUSIF by answering six questions posed by Hatch related to FOM, services credit unions offer to members and executive compensation.
"The NCUA has thoroughly responded to Chairman [Orrin] Hatch's inquiries, with specifics laying out how the loss of the credit union tax exemption would impact credit unions and the American taxpayer," said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. "NAFCU appreciates Chairman Hatch's interest in performing the Senate Finance Committee's oversight role and we look forward to working with Congress to focus on issues critical to the credit union industry and our members."
Following the Hatch letter to McWatters in January, NAFCU defended credit unions' federal tax exemption and the benefits it provides to the nation's economy, as well as the NCUA's role as a strong, independent and transparent regulator.
Get daily updates.
Subscribe to NAFCU today.