Don’t Tax My Credit Union!
As nonprofit institutions, credit unions have long enjoyed tax-exempt status. This enables them to pass on the savings to their members through higher dividends and lower interest rates on loans. This member-first approach is the reason more than 140 million Americans choose credit unions.
However, the new administration and Congress are moving fast on tax reform, and this can mean adding a new tax on credit unions and their members. Let’s take a look at what this means and steps you can take to prevent it from happening.
The political conversation
Several states and federal legislators are reviewing all policies that affect financial cooperatives. Proponents of these changes argue that all financial institutions should contribute equally to state and federal revenues, while opponents maintain that credit unions provide essential community benefits that would be jeopardized by new taxes. This debate is fueled by larger conversations about fiscal policy, the role of cooperatives in the economy and how best to support local communities in times of economic uncertainty.
How credit union tax status may change
Currently, the tax-exempt status of credit unions is based on their nonprofit, member-focused structure. However, in today’s shifting political landscape, some lawmakers and financial institutions have questioned whether credit unions should continue to benefit from this exemption. This can impact credit unions and their members in a big way. Potential changes might include:
Reclassification as taxable entities. If the changes take place, credit unions could be subject to corporate income tax, which would significantly alter their financial structure and operations.
Additional fees and assessments. Instead of a full tax, some proposals suggest imposing special assessments or fees on credit unions to “help level the playing field” with commercial banks.
Stricter regulatory oversight. Any move to change the tax status would likely come with increased oversight, which could raise operating costs and reduce the benefits currently being passed on to members.
What you can do about the potential changes
Credit unions need you!
Every credit union member needs to join this fight. It’s important for federal lawmakers to know that getting rid of the credit union protected federal income tax status would hurt the people they were elected to serve.
A new tax on credit unions could significantly hurt your financial well-being. You may have to pay fees on checking accounts and pay higher interest rates on loans. In addition, your savings accounts may grow at a slower pace if your credit union needs to lower the offering rates on share/savings products.
Take action now! Send a message to your U.S. representative and senator today, telling them to oppose any effort to add a tax on credit unions.
The sooner we make our voices heard, the better the chance we have of preventing the new legislation from being passed. Do it today!