Credit unions' tax-exempt status unfair

After decades of aggressive transformation at growth-obsessed credit unions and acquiescence by The National Credit Union Administration (NCUA) and the Independent Community Bankers of America recently launched a nationwide campaign calling on policymakers and the public to “Wake Up” to costly tax subsidies and irresponsibly lax oversight of these tax-exempt financial firms.

The credit union tax exemption dates to 1934, when Congress chartered credit unions to serve people of modest means with a “common bond.”

Today, credit unions are virtually indistinguishable from taxpaying community banks. The $1.51 trillion industry now earns billions of dollars in profits every quarter, while remaining tax-exempt.

As the credit union industry has evolved, the taxpayer subsidy has grown. The congressional Joint Committee on Taxation last year tallied the tax subsidy at an annual cost to taxpayers of nearly $2 billion and rising.

Most recently, the NCUA proposed a second delay in implementing rules requiring credit unions to hold adequate capital to protect against losses. The proposed rule would delay the effective date by more than two years. It was noted that risk-based capital rules went into effect for banks in 2014.

What would this mean for New Mexico in 2018? Credit Unions avoided paying $22.7 million in federal taxes. New Mexico Credit Unions held $11.2 billion in tax-free assets. Lost tax revenue from New Mexico would pay for 205 teachers, 143 police officers or 149 social workers.

Community banks encourage policymakers to open their eyes to the threats posed by these financial firms’ abandonment of their founding mission facilitated by their captive federal regulator. We continue our call for Congress to review this industry’s unjust, taxpayer-funded annual subsidy.

Kent Carruthers is president of The Citizens Bank of Clovis. Contact him at:

[email protected]