Has anyone ever conducted a survey as to how much federal taxes all of the USA's Credit Unions would have to pay if legislation was passed to start taxing Credit Unions. Has anyone ever read anything about this issue. I read in the State of SC alone it would amount to over 40 million dollars. I personally think it's time for a change.

All right - I have to put my Credit Union cheerleader hat on.... Been working for one or another all my adult life so far.

Perhaps the change "it's time for" is a change to a Credit Union charter.

Any bank that thinks Credit Unions have a sweet deal is invited by CUNA (the Credit Union National Administration) to convert their charter to a Credit Union charter. You may contact them at www.cuna.org for information on how to accomplish that. This is a serious offer. You can also contact the South Carolina Credit Union League at www.sccul.org.

Credit Unions are not-for-profit organizations. There are no shareholders to pay (other than the members). All earnings are returned to the membership in the form of dividends (interest) on share (deposit) accounts, lower rates on loans, and lower fees. All member-shareholders have a say in how the business is run by voting for the Board, and any member can even run for the Board if they are so inclined. All Board members are volunteers.

Credit Unions aren't sitting back getting rich on not paying federal taxes - it's all returned to the community. Taxing Credit Unions would only result in higher lending rates, lower savings rates, and higher fees to all consumers.

If you would like to read up on the Credit Union point of view on this issue, here is a link to recent CUNA newsletters you can read.

Way to go Tisa. I wonder if anybody besides me ever read about the major corporations in this country that pay no taxes? Don't pick on the poor credit unions because they offer services at less cost than banks.

If credit unions don't make a profit, why do they oppose taxation? How can you pay taxes anyway if you don't make a profit?

I don't have a problem with "real" credit unions being tax-exempt. The problem is that there seems to be a move to turn credit unions into banks (if not by charter, then by unlimited memberships and services) without the resulting hybrid entity being treated on par with banks re: taxes and regulations. There are some entities that have "credit union" in their name but that simply aren't credit unions any longer. Those entities' status needs to be addressed.

I agree with Walden.

I, too, agree with Walden.

There is a market niche for the old 'credit unions' where one is established for workers at a specific entity or job type (locally - Ford Motor Company; Colgate-Palmolive, etc.). This was a job perk to be able to belong to a credit union.

There are now local credit unions for individuals who live or work in a 9 county area. That, in my opinion, is too much like a bank. If credit unions are becoming more and more like banks, then the playing field needs to be more even. How can a bank compete if a credit union can charge a lower interest rate on a loan or pay higher on a checking account?

In Mass, we have a couple of huge CU's that are applying for state wide branching, that's a bit excessive. Most of them in our area state that if you work, live in a 50-mile radius or have a family member that lives or works in a 50-mile radius, you can become a member.

We have several credit unions in our service areas that have expanded their membership requirements. In fact, it not just live or work in several possible counties - it also includes worship in or go to school in those counties. One also says that you can be an immediate family member of an eligible person or be someone who live in the same houshold as an eligible person. You don't even have to live in the same state if you're an immediate family member of a person who is eligible. (and the eligible person doesn't even have to bank at the credit union). Their website actually says this.

Some credit unions might as well say -"we'll let anyone join."

I guess I'm still not really clear on this. I replying to Jokerman's post as a mere convenient place to join. What exactly would you tax. If all revenue beyond overhead is being paid out as interest to account holders, would you tax this interest again? Would not that create the hue and cry that if my interest on my CU account is taxed twice, so should your's from your bank interest paying accounts. Are we saying that the big credit unions are acting as for-profit entities? If so, I would think that that would be alarming. I would guess that I am in the middle on this, woking for a bank and having accounts at a CU (traditional). One thing that I have seen that could be driving the growth of CU's in recent years is the rise of consultant driven (I do not mean to lump all consultants here, this is a particular group of agencies) plans to boost the bottom line, typically at the customers' expense. Such strategies as structuring processing of deposits and withdrawals to maximize ODs at any given moment. While these are absolutely legal, they do raise the slime factor somewhat, and might make customers look elsewhere. Anyway, I guess I am just somewhat ambivalent about this subject, and I'll leave it at that.

It's not just earnings that are not taxed, it is everything. Credit Unions, at least in my state, do not pay ANY sales tax on equipment, travel (including hotels and airfare). The managment of the credit union I worked for I was there only for a very short time), used to go on some very nice "junkets", all tax free!!!!!!

I really do not want to offend our fellow CU posters but I have a question. I work for a mutual savings institution. We also have shareholders and we also "reinvest" our profits in the form of lower rates on loans and higher rates on deposits. Yet, we do have to pay taxes, property taxes, sales taxes, use tax, etc. The only difference I can think of is that our directors receive a small amount of pay.

Someone correct me if I am wrong. By the way, I have a relative who sits on the board of a credit union in another state and we go round and round over this issue.

CU "profits" are used to build equity and pay dividends to 'shareholders/customers.'

The problem is that paying higher rates on accounts, versus a bank, simply based on the fact that CU's are not taxed, e.g. the non-taxed funds are used to pay the higher rates, results in an uneven playing field. A long time ago, that made sense based on the fact that CU’s provided services to under-banked segments primarily in poor areas. Now, CU’s are after everybody – even business customers in some cases with lots of CU’s with assets in the multi-billion dollar range.

The interesting thing is that if CU’s become taxable, they simply can make sure that no income is generated to tax – just pay any excess out, as they don’t have real shareholders to be concerned about.

I’d say, structure a way to tax the huge CU’s and leave the small ones alone.

I work for a bank, but have had a small account at a traditional credit union for more than twenty years. Their rates used to be better than bank rates, and at the end of the year, they credited account holders/borrowers with a "rebate" from their income. This is no longer the case--their rates are comparable to ours, and no rebate in at least twelve years. Since they do not offer better rates, and no rebate, where is the income going? (they did build a nice, new building this year!)

That is a very good question...where did the profits go?
Anybody? These large CU's that want to be a bank should be taxed and regulated like a bank. I agree we should leave the smaller 200M or less CU's alone!

I work for a bank, but have had a small account at a traditional credit union for more than twenty years. Their rates used to be better than bank rates, and at the end of the year, they credited account holders/borrowers with a "rebate" from their income. This is no longer the case--their rates are comparable to ours, and no rebate in at least twelve years. Since they do not offer better rates, and no rebate, where is the income going? (they did build a nice, new building this year!)

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Your statement and the question below - where do the profits go? - is partly answered by you - the new building.

I worked with a CU for a short time years ago and it's basically an extraordinary salary/benefits scenario with a lot less work, versus the banking world. In banking, one needs to make big money after tax or the shareholders want to eat your lunch. With CU's anything goes and most of them are now headquartered, at least, on some of the most expensive real estate in America - outstanding facilities, outstanding benefits, pensions, etc. The directors don't get paid, but they regularly fly all over the world to attend conventions that are really vacations.

So, basically your CU needed money for perks, so they just cut you off as a 'shareholder.' Or perhaps the CU is now mis-managed and really overstaffed, but they can always cut off your 'rebate' to off-set that scenarios.

Yes - true that CU's, like banks, cannot grow unless there is capital to support that growth, so that would be a downside of paying out all profits, a deserving downside.

I believe in CU's, but only when they serve their original purpose - serve the under-banked segments, but just look at who is serving those segments now - check cashing entities that charge a huge fee for their services - with those entities actually taking the place of CU's that simply no longer want the small account or to provide service to poor people.

One story from my CU days - I recommended that the CU go after a food entity - that employed 200 people - primarily minimum wage - relatively high turnover - answer no, way too much trouble for small accounts - the SEG (as CU's all them) just didn't have potential. You see, it's now all about the CU, not the people out there that need a leg up. Most CU's have lost their way with few exceptions.

Offered at the largest financial institution in Alaska:

Private Banking
Trust Services
Small Business Banking
Large Corporate Banking

They are the number one HIGH-income HMDA lender in home purchases.

They are near the bottom when it comes to funding rural low-income home buyers.

You probably wouldn't expect that: They do not pay taxes and they are not regulated under the CRA.

What they do have going for them is a lobby that is a heck of a lot smarter than ours apprently because they've gotten away with this goober for years.

Don't screw with the CRA regulation, tax and charge credit unions over $250MM to follow CRA. Billions would be on the table!!! I don't have time or patience for the CU lobby that says they're all good guys. Sure they once were, now they're acting like banks. Those who meet the size requirements for CRA should be treated the same way as we are. It's good for the community (the largest financial institution also never gives out donations and isn't even a United Way player) and the taxes would be good for our states and federal governments.

Lets play fair kids!

This is what I find interesting:

I received a "stuffer" from a credit union ENCOURAGING me to write checks for more money that I have in my account because the "friendly" credit union will go ahead and pay it. Hmmm.....

Then, as I'm driving to work in the morning, I hear a commercial for one of the LARGEST credit unions in Southern California. The commercial encourages EVERYONE to join this credit union because they are "just like a bank" but without the fees. Oh yes, they can do EVERYTHING that a bank can, but they're nicer. Why? Because they are a credit union. Gggrrrrr.....

So I'll fess up and say my husband and I got a car loan from a credit union (I won't borrow from any place where I work....), and the Reg Z disclosure was so wrong it was hysterical (okay...hysterical to a Compliance Officer...)

The CU offered a .50% rate reduction for automatic payments, and the rate would increase if the automatic payments were discontinued. The APR and payment schedule were done at the HIGHER rate, and no variable rate disclosure was given. Instead, we have this "side agreement" about the conditions for increase. What's wrong with this picture?

That's right on the money. Once again, I believe in CU's as long as the tax break is used to serve segments that require that level of attention. When that is not the case, why not level the playing field?

Think about this:
10,000 people are members of a CU that generates income that is either retained so that more people can be accommodated or paid as dividends to participants - no tax in paid on the net income.

500 people put together a bank to serve 10,000 people with profits retained so that more people can be accommodated or paid out as dividends to the 500 people that put up the money - but not before tax is paid on the net income.

In both cases, the 10,000 people are the same people. In both cases they are all middle class or better. Under our system of government, why would the CU not be subject to a contribution to our government in the form of a tax?

The stats bear out that credit unions are more likely to serve middle and upper income persons.

Our state’s two largest credit unions are $1.2B and $600MM in assets. In 2002, according to HMDA data, the larger took only 10% of its conventional home purchase loan applications from low or moderate income applicants - - and 49% were from upper income applicants!

The second credit union had a similar record - - only 10% of its conventional home purchase loan applications were from low or moderate income applicants - - and 46% were from upper income applicants!

Further statistics released by our state banking association show that between these two credit unions, an estimated $7.4 million in federal taxes were forfeited due to their tax exemption.

Reform legislation is overdue.

Reform legislation is overdue.

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It's not going to happen. CU's have the votes as they are able to rally their members to write, call, whatever and banks can barely get customers to do anything.

Is it me, or does anyone else see some similarities between CU's now, and S&L's back in the early 80's?

I'm not talking about tax exemption, but rather the "preferred" status that S&L's seemed to enjoy over banks in the minds of the media and general public, the fact that S&L's felt they should be able to go into the same lines of business as banks, the really fancy buildings that S&L's built for themselves, and the fact that regulatory enforcement seemed less even between banks and S&L's.

The things that make you say "Hmmmm....."

All of this is very confusing to me. If CU"s don't make a profit than why all the comotion about them not paying taxes. If they don't make a profit why are they constantly trying to grow and expand. Sounds like a lot of lost money that could be used to help offset my tax burden!