Govt News re: Credit Union Tax Exemption

Thrift bailout is 313 years of CU tax exemption

WASHINGTON (6/26/07)--It would take more than three centuries for the amount of the annual credit union tax exemption to reach the level taxpayers forked over to deal with the savings and loan crisis of the late 1980s and early 1990s, according to the Credit Union National Association's (CUNA's) analysis of a recent government report on the banking industry.

The Government Accountability Office (GAO) report, released to the public in May, updated estimates of the costs of the Federal Savings and Loan Insurance Corp. (FSLIC) bailout, in 2006 dollars. The $438 billion price tag represents $166 billion of total resolution costs borne by taxpayers, and $272 billion in total interest costs borne by taxpayers.

CUNA analysis showed it would take 313 years at the Treasury's 2007 estimate of $1.4 billion for the annual credit union tax exemption amount to equal the total of the savings and loan bailout.

"Three centuries is a long time to wait to get paid," said CUNA President/ CEO Dan Mica. "The GAO study shows just how absurd is the banker argument that the credit union tax exemption must be erased to help pay government bills.

"Further, as banks have posted five straight years of record profits, the GAO study clearly indicates: The existence of credit unions has no impact on the ability of banks to make money – lots and lots of it."

The GAO study found that, measured by return on assets, banks are generally more profitable than are thrifts, and both are more profitable than credit unions. In 2006, GAO reported, banks posted 1.27% ROA, thrifts 0.96% and credit unions 0.81 %. (News Now May 31)

CUNA's analysis, incorporating Federal Deposit Insurance Corp. data with the GAO results, revealed that even smaller banks have enjoyed greater profitable over the last several years, posting an average ROA of 1.2% in 2006. Other findings of CUNA's analysis of the GAO study revealed:


Banking institution federal tax breaks yield a 2007 total of between $1.3 billion and $1.9 billion, based on CUNA's combination of known or conservatively estimated bank tax advantages;


The 2006 tax revenue loss from the 2,356 Subchapter S banking institutions was $726 million. The GAO reported that banks are significant users of Subchapter S status, and presented an analysis showing that the net effect of electing Subchapter S status is to lower the total amount of tax for a Sub S bank and its owners by almost 22% compared to what a Subchapter C bank and its owners would pay; and


According to a number of private sources consulted by CUNA, in 2006 the average bank CEO total compensation was $353,000; the average credit union CEO compensation, at the same time, was $88,000. The disparity, CUNA found is evident even when comparing like-sized institutions. The GAO reported that although publicly available information on executive compensation in the banking industry is limited, compensation for bank executives, especially CEOs, has increased.



The study was requested in 2006 by Bernard Sanders, who at the time was an Independent member of the House representing Vermont. Sanders was elected to the Senate in November of that year.

Courtesy of www.cuna.org/newsnow