ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release November 3, 2005 #05-83
E-mail: [email protected]

ACB URGES CONGRESS TO REPEAL CONGLOMERATE CREDIT UNIONS’ TAX EXEMPTION

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WASHINGTON, D.C. — America’s Community Bankers urged Congress today to repeal the federal tax exemption enjoyed by bank-like, conglomerate credit unions.

“Congress should review the government-created competitive disparity between credit unions and community banks, particularly those that are mutually organized, and should enact legislation that represents sound public policy, is fair to all competitors in our banking system, and is fair to the American taxpayer,” said Mark E. Macomber, ACB’s first vice chairman, in testimony before the House Ways and Means Committee.

Macomber is also president and CEO, Litchfield Bancorp, Litchfield, Conn., a $180 million mutual community bank that is part of a two-bank mutual holding company.

“We emphasize that our concern remains with the sophisticated credit unions that have grown beyond their common bond and are as bank-like as mutual institutions that are taxed,” said Macomber. “From a competitive perspective, these credit unions have become tax-exempt community banks, creating situations in which a billion dollar, tax-free credit union can sit opposite a $180 million, non-stock, taxpaying mutual savings bank like mine.”

Macomber explained that the tax exemption for mutual savings institutions was repealed in 1951 when Congress determined that mutuals were mature enough and were providing a sufficiently broad range of banking products and services.

“Despite the revocation of their tax exemption, mutual savings banks continue to experience growth,” and have “thrived as pillars in the communities they serve,” he said. Some 765 mutual institutions with assets of $250 billion paid $800 million in taxes last year, while the 9,000 credit unions with $646 billion in assets paid $0 in taxes.

“Like the savings associations and mutual savings banks of 1951,” Macomber said, credit unions “should be recognized as a mature industry that has a responsibility to contribute to the nation’s armed forces, educational programs, homeland security, transportation system and other important federally funded initiatives.”

He noted that, “Over 50 years ago, this same committee undertook an examination of the tax exemption granted to mutual banks and savings and loans. After lengthy deliberation, the committee concluded that mutual institutions were competing directly with banks and to continue the exemption would be discriminatory. The same is true today for credit unions.”

Macomber said that conglomerate, full-service credit unions are competing for the same customers in wide geographical service areas, and are offering the same products as community banks, large commercial banks and even brokerage firms.

Two Government Accountability Office reports have called into question whether credit unions are serving persons of modest means — the premise for granting the tax exemption. And a study by the National Community Reinvestment Coalition found that banks make a higher portion of their home loans with fewer loan denials than credit unions to traditionally underserved populations.

Credit unions offer all the products and services as banks. In addition, tax-exempt credit union service organizations, subsidiaries of credit unions, are offering services not permitted by a credit union’s charter. These include: trust administration and investment services, real estate brokerage, pre-paid legal service plans and travel agency services.

Click here to read the testimony.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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