By Rick Wallis
May 14, 2018 at 5:07 PM – Portsmouth, NH — Before I begin my statements about credit union taxation, I would like to say that credit unions are part of a unique and diverse financial system in the United States. The banking and credit union systems are like no other in the world and are large contributors to the country’s strong economy.
With that said, there are a number of inaccuracies stated in a May 8, 2018 opinion to the editor, “OP-ed writer might understand banking, but not credit unions” by Paul Gentile, President and CEO of the Cooperative Credit Union Association. First, Mr. Gentile states that “The U.S. credit union system is the purest example of a cooperative financial model anywhere in the world”. Actually, the purest and first cooperative financial models are mutual and cooperative savings banks. The first mutual savings bank was incorporated in 1816 in Massachusetts while the first credit union was established in New Hampshire in 1909, almost a century later. Mutual and cooperative savings banks originated as philanthropic endeavors to assist the working class by teaching the values of thrift and helping people save for future financial security. This form of banking still exists today under those same principles.
Mr. Gentile continues to describe credit unions as “not-for-profit”; however, I disagree with that claim, they are tax exempt. The four largest credit unions in the state of New Hampshire made a profit of $35,492,086 in 2016 based upon their IRS 990 reports. Mr. Gentile stated that, “The only tax credit unions do not pay is federal income tax, and rightfully so”. Based upon the 2016 corporate income tax rate of 34 percent the tax exemption totaled over $12 million for 2016. That is a very large “only”.
Before 1951, mutual and cooperative savings banks were tax exempt like credit unions. At that time, Congress voted to eliminate the exemption because mutual and cooperative banks were acting very similar to other banks, despite being depositor owned.
Credit unions were formed to serve a common bond of membership. Since their formation, some credit unions have expanded their field of membership to basically… anyone that works or lives in a particular area, like the whole state of New Hampshire. Sounds like a bank, doesn’t it?
There are those even in the credit union industry that also feel large credit unions, which have gone beyond their congressional mandate, should pay federal income taxes. Robert Taylor, President/CEO of Idaho State University Credit Union, stated , “…that many larger credit unions operate in the same manner as taxable banks, and I believe it’s time for them to convert to bank charters and be taxed like the “big boys”, because the credit union movement doesn’t need them”.
I believe our financial system is stronger when it includes tax exempt credit unions that stay true to their common bond of membership, and I believe, as Mr. Taylor, that it’s time large credit unions, that operate like banks, pay their fair share of federal income taxes, “and rightfully so”.
Rick Wallis is president and CEO of Piscataqua Savings Bank a state chartered mutual savings bank since 1877
Read the original article from the Seacoast Online on May 14, 2018.
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