Congress should focus its attention in 2020 on the tax treatment of large, bank-like credit unions and reconsider the merit of the tax exemption these entities enjoy, according to a new issue brief published by the National Taxpayers Union today. The brief comes on the heels of a Tax Foundation research note published late last year which found that the credit union tax exemption was “not justifiable.”
In the brief, NTU’s Thomas Aiello pointed out that just over 300 credit unions have assets of more than $1 billion and collectively hold more than two thirds of the total assets of the industry. Moreover, “nearly all membership and asset growth of the credit union industry as a whole has occurred just within credit unions of this category.” That growth includes purchases of taxpaying banks by tax-exempt credit unions, a disturbing trend that Aiello also highlighted.
“Permanently taking taxpaying business entities off treasuries’ tax rolls and shrinking the tax base is a textbook example of poor tax policy,” he wrote. “The purpose of the tax code is supposed to be neutral, rather than helping one particular business gain the upper-hand in a free market.” Should the credit union tax exemption be allowed to continue, he added, it would keep an estimated $22 billion in revenue off the tax rolls over the next decade.