Credit union advocates from Chartway Federal Credit Union and ABNB Federal Credit Union held a frank discussion with Rep. Scott Rigell on Monday in his district office on the credit union tax exemption and other topics.
ABNB CEO Carl Ratcliff joined with Chartway representatives -- Kim Little (Regional President); Melvin Mizelle (Treasurer, Board of Directors) and Eddie Matney (Volunteer on Legislative, Regulatory & Advocacy Committee) -- in the discussion. Rigell’s district director and his banking services staffer participated, although the latter was there via telephone from Washington.
Rigell, who is not on the committees that oversee financial services or tax-writing, said he thought talk of tax reform was focused on corporate loopholes, not the credit union exemption from federal income taxes. He said that if Congress can’t tell the difference between a credit union and bank then there would be questions about the credit union tax exemption.
“As long as you stay true to your defined mission, there won’t be pressure” to eliminate your tax exemption, the Congressman said.
Chartway representatives talked of the Credit Union Difference, which is based on the very structure and cooperative social mission of credit unions. They noted that they saved their members $6.5 million by restructuring home loans and providing second mortgages in situations where banks would have sought foreclosure.
Ratcliff asked the Congressman how does the tax exemption differ from a Subchapter S bank not paying federal income tax? Rigell indicated surprise about the Subchapter S banks not paying federal corporate income tax.
The credit unions also talked about how they still make loans as low as $100, even though such loans are inefficient and bring no profit.
The congressman repeated that the tax exemption is harder to justify when credit unions look and act like banks. “I’m not saying we’re at that point yet,” he concluded.
Credit unions brought up the need for Congress to pass legislation on raising the cap on member business lending and allowing credit unions to seek supplemental capital, as well as updating the Congressman on the latest proposals on replacing Fannie and Freddie.
When credit unions brought up the issue of regulatory burden, Rigell said the parties agree on that point. “I advocate lighter, smarter regulations,” the Congressman said, calling the Dodd-Frank bill “a classic example of unintended consequences and over-reach.”
Rigell is co-sponsoring the legislation that would provide more fairness in the regulator examination process.