With 20 years having passed since Congress last held a hearing to conduct oversight of the federal tax exemption that credit unions receive, a new survey conducted by Morning Consult on behalf of the American Bankers Association found that a wide majority of U.S. consumers (67%) believe that Congress should reexamine the tax-exempt status of federal credit unions, with only 14% opposed to such a hearing.
Most tax-exempt organizations must file a special IRS form called Form 990 to ensure basic transparency and compliance with U.S. laws for nonprofits. Most tax-exempt organizations also pay taxes on business income unrelated to their tax-exempt mission. Not only do federal credit unions enjoy a federal tax exemption, but they are also exempt from filing Form 990 and from paying unrelated business income tax.
“It is undeniable there is a growing demand – including from regulators and members of Congress – for more transparency and accountability within the credit union sector,” ABA President and CEO Rob Nichols said. “A Congressional hearing is long overdue and would give credit unions an opportunity to demonstrate how they are meeting their mission.”
Among the survey’s findings:
- More than three times as many consumers believe credit unions should pay federal taxes just like banks compared to those who feel they should not (58% vs. 18%, respectively).
- Only 17% of Americans are aware that credit unions do not pay federal taxes, while 83% are unaware of credit unions’ tax-exempt status.
- By a 5-to-1 margin (64% vs. 13%), consumers believe that credit unions should have the same disclosure and taxation requirements as other tax-exempt organizations.
The survey also revealed how consumers view the regulation of nonbanks, including credit unions and financial technology firms:
- Eight in 10 adults (79%) care if the business that handles their finances is held to the same legal standard for consumer protection as a bank and the vast majority (90%) agree that any business providing bank-like services to consumers should be held to the same standards for consumer protection as a bank.
- By a decisive 7-to-1 margin, consumers said credit union acquisitions of banks should receive the same level of regulatory scrutiny as bank mergers (68% said they should vs 10% who said they shouldn’t).
