Pub. 4 2014-2015 Issue 5

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S March • April 2015 5 Effort Continues Toward Leveling Playing Field for Credit Unions CBA’s Jenifer Waller and I testified last month in front of the Colorado Financial Services Board encouraging them to disallow the expansion of another credit unions’ membership base in Colorado. Many credit unions have ballooned far beyond their narroworiginal charters: to serve people of modest means who share a common bond, such as an employer or church. Instead, the tax exemption some credit unions enjoy is subsidizing wealthy individuals and businesses – those who do not need taxpayer assistance. Time and again, the Colorado Bankers Association has stood up to oppose expansion of membership groups for credit unions in the state, who seek to operate like banks, but without paying the same taxes banks do. But let me be clear: Colorado bankers are not afraid of competition; we thrive on it. We support small nonprofit credit unions that serve a narrow membership, and we enjoy competing with large, for-profit credit unions that want to expand their member- ships. Our disagreement isn’t with credit unions in general, but with those that have morphed into tax-exempt banks. In fact, a 2006 study by the Government Accountability Office found that banks have greater percentages of low- and moderate-income customers than credit unions. And the typical credit union member has higher-than-average income, more years of education and is more likely to own a home than non-credit union members. Put simply, many credit unions have outgrown their special tax treatment. Credit unions’ tax exemption currently costs the U.S. Treasury $2 billion every year. Conversely, the more than 6,000 community banks that compete with themcontribute $4 billion annually in taxes to support our nation and their home communities. The American Bankers Association in June 2013 wrote directly to President Obama encouraging him to review credit unions’ tax exempt status as his administration and lawmakers worked to address the country’s fiscal challenges. The letter read, “The credit union tax exemption is a depres- sion era tax break that has outlived its purpose. The time has come to abolish this exemption. It would be a fiscally sound way to help reduce the U.S. debt and eliminate distortions in the financial services industry.” Administrations previous to Obama’s – bothDemocratic and Republican – have recommended ending the credit union industry’s tax exemption. And Canada and Australia, in 1972 and 1994 respectively, repealed their credit union industries’ tax exemptions. The exemption is allowing credit unions – which now comprise a $1 trillion industry – to grow twice as fast as banks, and allows them to take business away from tax-pay- ing institutions. There are now 208 credit unions in the United States with assets of more than $1 billion, making them larger than 90 percent of taxpaying community banks. There were just 13 only twenty years ago. That flies in the face of the free-market principles on which our economy is based. Our tax code should not pick winners and losers by providing a competitive advantage to one segment of an industry over another. The imbalance in our industry is palpable here in Colo- rado, and it’s growing. To learn more about this issue, go to http://www.coloradobankers.org/?52. n Jeff Schmitz, Citywide Banks CBA 2014-2015 Chairman