Former American Bankers Association President Laurie Stewart today called on policymakers to review the credit union tax exemption, which is estimated by the Treasury at nearly $ 25 billion in lost revenue by 2031. Stewart, who is president and CEO of Sound Community Bank in Seattle, noted that while there are still “very small, quintessential credit unions that are functioning as intended,” the majority of credit unions ” have become banks âand should be taxed accordingly.
Stewart recounted her own experience in converting her institution from a credit union to a bank, which she did as part of a strategy to bring products and services to the community that went beyond the period part of the activities of credit unions. Originally, the institution was sponsored by a cooperative grocery wholesaler and its customers shared a common bond, a key part of the credit union charter. However, Stewart noted that for his institution and many others, this dynamic has changed over time, and today many tax-advantaged credit unions compete directly with tax-paying banks.
âAs this common bond disappears and we all do business in the same environment, [if]credit unions cultivate the same customers who [banks are]cultivate – and indeed better-off clients in many cases – then we don’t have that ability, that unique membership field, that common bond that supported the tax deduction, âsaid Stewart. âI encourage Congress to shine a light on the whole industry and really understand what credit unions do, at what levels, when they look like banks, when they don’t look like banks, then move to a rational form of taxation, leaving an exemption for nonprofits for genuine nonprofits. “