McWatters to Hatch: Ending CU exemption would create issues

Removing credit unions’ federal tax exemption “would almost certainly create a safety and soundness issue for the [National Credit Union Share Insurance Fund] that could ultimately fall to U.S. taxpayers,” wrote NCUA Chair J. Mark McWatters in a March response letter to Senate Finance Committee Chairman Orrin Hatch, R-Utah.

McWatters was responding to a letter from Hatch sent to the NCUA in January outlining concerns that credit unions are evolving away from their original tax-exempt purpose and raising questions about recent changes to field-of-membership (FOM) rules.

“Federal credit unions continue to be member-owned, democratically operated, not-for-profit organizations that are managed by boards of directors that consist mostly of volunteers, and work primarily to meet the credit and savings needs of consumers of modest means,” McWatters wrote.

McWatters provided a deep dive into the effects the elimination of the federal tax exemption could have on the NCUSIF by answering six questions posed by Hatch related to FOM, services credit unions offer to members and executive compensation.

 

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