In a rare display of bipartisanship, 11 California freshmen members of Congress from both parties sent a letter Thursday to the House Committee of Ways and Means stating their support of the credit union tax exemption—an exemption bankers are pushing to repeal in this year's tax reform package.
The letter’s lead authors are Representatives Jared Huffman, D-Santa Rosa, and Col. Paul Cook, R-Yucca Valley. The letter is also signed by Ami Bera, D-Sacramento; Julia Brownley, D-Thousand Oaks; Tony Cardenas, D-Pacoima; Doug LaMalfa, R-Chico; Alan Lowenthal, D-Long Beach; Scott Peters, D-San Diego; Eric Swalwell, D-Pleasanton; Raul Ruiz, D-Palm Springs; and Mark Takano, D-Riverside.
The letter to the committee, which governs tax policy, emphasizes support for credit unions as community financial institutions serving the local consumer.
“Credit unions play a vital role in our economy, especially in California where the economic conditions of the last five years have been challenging,” says the letter. “Credit unions continued to be a resource for their members by keeping members in their homes, granting access to credit, and helping them through the toughest of times. For these and many other reasons, Congress has upheld their tax-exempt status since 1935.”
With Congress looking at comprehensive tax reform, the American Bankers Association and the Independent Community Bankers of America are asking legislators to repeal the credit union tax exemption. They argue that credit unions no longer meet the criteria for such an exemption.
In their letter, the freshmen Congressmen write: “Credit unions are inherently different from other financial institutions because of their mission and their focus on their members. As you may know, credit unions, as not-for-profit cooperatives, are categorized as tax exempt under section 501(c)(14) of the U.S. tax code. Credit unions are organized and operated by a volunteer board of directors, do not sell stock or bonds, and return all profits to their members.”
The legislators argued that the credit union tax exemption guarantees choice in financial services for consumers and communities.
Though Congresswoman Linda Sanchez, D-Cerritos, a member of the House Committee of Ways and Means, has expressed her support of credit unions retaining their tax status, the committee has been drafting legislation to reform the tax code. The Senate committee has started its “blank page” approach, which means all expenditures have to justify their exemption to “make it on the page.”
Both committees have committed to reporting bills before the end of the year.