Talking Points - Taxation

Thank you for your interest in preserving consumers' right to choose member-owned, not-for-profit credit unions as their families' financial services provider.BackgroundSome in the banking industry have been promoting legislation to make credit unions pay corporate income taxes (or it may also be called a franchise tax). Bankers are pushing their initiative at both the state and federal levels. Reasons why credit unions should not be subject to an income or franchise tax.

(1) Consumers Save Money By Choosing A Credit Union

• Credit unions promote the economic well-being of our members, including those of modest means.

• As a cooperative, a credit union is obliged to return its earnings (in the form of dividends on savings) to its members, after paying for the operations of the credit union and meeting required net worth (reserve) targets.

• In fact, according to Credit Union National Association studies, credit unions return $5 to their members in lower costs for every $1 realized in tax savings. And since that money goes directly to the credit union’s members, it stays (and is spent again) in the community — an important distinction when more consumers must do business with giant out-of-state banking conglomerates.

• Research suggests that the average consumer could save $150 a year simply by choosing a credit union for their financial services.

(2) Credit Unions Are Structurally Different From Other Financial Institutions

• The Credit Union System is cooperative, member-owned, volunteer-directed, not-for-profit and therefore tax-exempt.

• While credit unions are regulated by the federal and state governments, we don't answer to stockholders, but to each of our 85 million members.

• Because our members own their credit union, taxing credit unions is nothing more than a new tax burden on hard-working Virginia and D.C. families.

(3) Credit Unions Work for People, Not Profit

• Credit unions work for people, not profit. When it comes to personal finances, credit unions are there to serve, counsel and protect their membership with compassion. We help to educate our membership to become better consumers of financial services even reaching into the classroom to educate young people helping them to be better prepared to enter the financial services marketplace.

• Credit unions continue to invest in people... expanding into those areas that have been traditionally underserved...like seniors living on fixed incomes, single working moms, minority communities needing greater community investment, and small business owners struggling to raise capital in the marketplace to build their dreams.

• Service to our members is our mission and 85 million Americans truly love their credit union. Ninety-eight percent of those we serve give us high marks.

• Credit unions are promoting the small business, entrepreneurial spirit of American enterprise by providing access to low cost credit alternatives and assisting with employee benefits.

• Despite the challenges of operating under a charter and governing legislation adopted in 1934 or earlier for state charters, credit unions have never wavered from our mission. We have adapted, providing financial services to those who would have been left behind by for‑profit ventures. Our continuing mission is to meet the financial needs of all our members.

(4 ) Why shouldn't credit unions pay taxes?

They do pay taxes. Credit unions pay real estate and personal property taxes-just like every other business. Localities use these taxes to pay for local services; e.g. fire, police, and for schools.

(5) Shouldn't credit unions be placed on the same playing field as banks?

No-because credit unions and banks are different. Credit unions are not allowed to provide the same services as banks-no major commercial loans, no corporate trusts, they can't invest in most stocks and securities. Credit unions membership is limited by law to a field of membership (geographic or employer sponsored) and credit unions focus on servicing small and individual accounts.