Credit unions stayed out of the conversation at the first Senate hearing on next year’s widely anticipated tax reform legislation, but friends and skeptics alike are telling DCUC that the credit union tax exemption is almost certain to be one of the issues examined on Capitol Hill in 2025. Congress will revisit the landmark 2017 tax bill in the 119th Congress, principally due to expiring provisions. DCUC has been keeping its ear to the ground as preliminary discussions are underway about how wide, and how deep, the rewrite will be.
Clues about what might be under discussion began to emerge in July. The influential Washington publication POLITICO laid out a process currently underway where a bipartisan group of House Ways and Means staff are taking early steps to identify exempt organizations, including credit unions, that should be looked at to determine whether their exemptions remain valid. In the aftermath of that article, there has been speculation about credit unions being a topic of conversation in the tax debate. Ways and Means staff predicted “credit unions may have to do some work next year. You are in the mix, along with a lot of other exempt industries.” At the recently concluded Congressional Caucus in Washington, hosted by America’s Credit Unions (ACU), former House Speaker Paul Ryan told the audience that credit unions should be “watchful during tax reform deliberations next year. All exemptions are likely on the table.” Other voices are chiming in. DCUC found out that a member of the House Republican Leadership told lawmakers during an August retreat that “credit unions buying banks needs to be looked at next year…those transactions should trigger some type of tax consequence.” Another Congressman cautioned a league group that “larger credit unions over a certain asset size need extra scrutiny and added everything is potentially under discussion in 2025. I’m not saying I want to see you taxed but understand that we’re going to take a 360° look at all exemptions.” DCUC is not a passive bystander as tax reform begins to gel. In a letter delivered in advance of the above-referenced September Senate Finance Committee hearing on tax reform, DCUC Chief Advocacy Officer Jason Stverak laid out the case for maintaining the credit union tax exemption, stating that defense credit unions and their member-owners “are strongly opposed to any proposal that would eliminate or undermine the nonprofit, tax-exempt status of credit unions. The longstanding tax-exempt status of credit unions reflects their unique structure and mission to provide financial services to their members, not to generate profit. Removing this status would have severe consequences for credit unions, their members, and the communities they serve.” Where does the tax reform road lead for credit unions? Like most things on Capitol Hill, there is not a definite timetable or set agenda, although updating the 2017 law is a priority of leaders in both chambers and parties. Spring 2025 is probably when the ball gets rolling, at least with hearings and maybe the release of draft legislation. Where things go from there is anyone’s guess. This potential tax bill presents threats to credit unions, but also opportunities. Following the Senate hearing, I was quoted in a credit union news outlet about the failure of the bank lobby to land a punch in Round 1 of the fight. But I added that “it appears most tax exemptions are going to receive scrutiny when tax reform is revisited next year. Credit unions have good arguments on the consumer benefits of their tax exemption—let’s sharpen our pencils and be ready to put them out there.” Comments are closed.
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