Credit union acquisition of community banks rising, but still “small proportion of overall consolidation”
Conservative taxpayer organizations and banking trade groups say they have new ammunition in their argument that the credit union tax exemption is outdated. They are arguing that credit unions are leveraging their tax exemption to gobble up community banks.
“Credit unions are ideal buyers, say experts, because they tend to be all-cash buyers, whereas commercial buyers prefer to use stock or equity for the deal,” Scott Hodge, president emeritus and senior policy advisor at the Tax Foundation, wrote in a recent report. “Since many community banks are family-owned or have a modest number of shareholders, they prefer the cash deal. And credit unions tend to offer a higher price for the purchase because they don’t have to worry about the tax implications.”
However, statistics released by the National Credit Union Administration show that credit union-bank purchases are a mere drop in the bucket when compared to the number of banks purchasing other banks. “Bank transactions with credit unions are a small proportion of the overall consolidation occurring in the financial services marketplace,” Kelly Lay, the NCUA’s director of the Office of Examination and Insurance, wrote in a December 14 memo to agency Chairman Todd Harper.
Still, the Tax Foundation is trying to elevate the issue, using the bank purchases as evidence that the credit union tax exemption is outdated and should be repealed. “Fairness and equity demand that credit unions be put on the same tax footing as the banks they compete with,” Hodge wrote in his recent report.
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