Dan Morrisey Queen of Peace Arlington FCU
Comments, Observations from Credit Union Treasurer/CEO Dan Morrisey

July 2013
« May   Aug »
Taxation Threat to Credit Unions
Filed under: General
Posted by: @ 1:28 pm

There are renewed threats in Congress to repeal the tax exempt status of credit unions. The Bankers and Banking lobby are leading that campaign. Credit Unions are countering with the Campaign, “Don’t Tax My Credit Union” http://www.donttaxmycreditunion.org/ . The environment for this push by the banking lobby is proposed “Tax Reform” - starting with a “Blank Page” eliminating tax exemptions, deductions and so on. Then, each tax exemption would need to be justified before going back on the list,

One “fact” and “detail” that the bankers, and others proposing to tax credit unions, seem to either leave out or unfairly state is just what taxes credit unions currently are exempt from. Contrary to the impression given by the banking lobby, as far as I know, there are only two types of taxes on credit unions that receive favorable treatment. The first is an exemption from Corporate Income Taxes. The second, for federally chartered credit unions, is an exemption for most state and local sales and use taxes, as well as hotel occupancy taxes.

There are lots of taxes that credit unions, credit union employees and credit union members pay. Depending on the state, a state chartered credit union (about 1/3 of US Credit Unions are state charters) may pay sales and use taxes. In Virginia, for example, only federally chartered credit unions are exempt from sales and use taxes. If a credit union owns real property, such as an office building or branch office, the credit union pays real estate taxes. If the state has a “personal property tax”, on vehicles for example, a credit union that owned a vehicle would pay that tax. Credit Union employees pay state and federal income taxes on wages and salaries, as well as Social Security taxes. Dividends earned by members on share accounts (savings or checking) or share certificate accounts in a credit union are taxed as “Interest” and a 1099-INT is issued in the same way that a bank would issue a 1099-INT for interest on a Bank CD.

Many of those advocating an end to the tax exempt status of credit unions are saying that they are only advocating taxing the big credit unions and that small (or very small) credit unions, such as Queen of Peace Arlington, would not have an added tax burden. The goal and strategy here seems to be to divide credit union and pit the small (or very small) credit unions against the larger credit unions. I hope that such a division in the credit union movement does not increase to the point that any of us are aligned with the bankers against our larger fellow credit unions.