Yesterday, the NCUA released a copy of chairman Mark McWatters’ response letter to Sen. Orrin Hatch addressing the continued relevance of the credit union tax exemption. Hatch, chairman of the U.S. Senate Committee on Finance, had sent a letter to the NCUA earlier this year asking six questions regarding expansion of field of membership for credit unions and the potential effects of elimination of credit union tax exempt status.
McWatters wrote, “As Congress reiterated in 1998, the FCUA defines the business for which credit unions are incorporated—to promote thrift among members and to create sources of credit for provident or productive purposes. The NCUA has endeavored to consistently construe the authority of federal credit unions in a manner that affords them reasonable flexibility — under the FCUA — to provide for the needs of their members, while also remaining true to the mission of meeting the credit and savings needs of consumers, especially persons of modest means, and protecting the safety and soundness of the Share Insurance Fund.”
In summary, the letter stated, “We believe that eliminating the credit union tax exemption, without also eliminating the statutory restrictions on credit unions, would almost certainly have a detrimental effect on the credit union system and increase losses to the Share Insurance Fund, which could ultimately fall to U.S. taxpayers. Moreover, we believe the regulatory changes and allowances you reference in your letter are all consistent with the requirements of the FCUA and the spirit of the President’s Executive Order on regulatory relief.”
Read the entire letter here.