By David Adams
This is a very busy time for us at MCUL & Affiliates. We’ve also just launched our annual cooperative advertising campaign and we’ve got much more in store as we continue with our mission to help credit unions grow, serve, and remain strong. I’ll touch on a few of those issues today, and you’ll find much more detail about all these topics and more in this month’s Priority Report newsletter.
First, let’s talk about the CU Link Campaign. By now you’ve hopefully seen the TV ads, heard a radio spot, or driven past a billboard because this campaign is bigger and better than ever. The campaign is off to a very strong start and will run through December. As you know, our credit union community contributed a record-setting $1.1 million to this year’s campaign. CUcorp also contributed $1 million in matching funds, $1 million in supplemental advertising and $500,000 in marketing incentives to credit unions that contributed their full fair share to integrate the messages into their own advertising. Now is the time to integrate CU Link advertising, using pre-designed templates that are available on the CU Link credit union administration area or with materials customized by Marketing Solutions to coordinate with the campaign. We welcome your feedback on this year’s campaign and how we can continue to improve this effort.
Our Lending and Insurance Solutions team is very busy with a number of new products, and many of them are designed to dovetail with the combination of the rise in new auto sales we’re seeing right now and the Invest in America General Motors discount. That includes CUNA Mutual Group’s new AskAuto solution that helps credit unions reach members and assists members in shopping for and purchasing vehicles.
Since this is the automotive capital of the world and all of us here in Michigan are connected to the industry in one way or another, it’s no surprise a lot of what we do comes back to cars. We are very excited about the newest addition to our Membership Enhancement program through CU Solutions Group – Credit Union Auto Club. You’ll find information in this newsletter about some upcoming webinars where you can learn more about the program and how it will help you grow member loyalty and revenue. At CUSG, we’re also finding new ways to help credit unions leverage our unique partnership with Gas Station TV to provide at-the-pump advertising as an affordable and effective way to target market in your local community. And our technology team has some critical information to share about DDoS threats and what your credit union needs to do to prepare.
Now I’d like to dive deeper into an issue that affects everyone who is involved with credit unions at any level, and that is the discussions currently taking place in Washington about the credit union tax status.
As you’re well aware, many decades ago Congress issued an exemption from federal income tax to state- and federally chartered credit unions because of their ownership and structure. One of the core reasons for the continued tax exemption is because even though times have changed, credit unions’ not-for-profit cooperative structure has NOT. Today, nearly 96 million credit union members across the country, including half the population of Michigan, benefit from lower rates on loans, lower fees on services, and higher returns on deposits. Nonmembers also benefit because the focus on service by credit unions keeps competitive pressure on banks.
The CU tax exemption has been reaffirmed by Congress several times, including in 1935, 1936, 1937, 1951 and 1998. So why is it an issue now? In part, it’s because the bankers have made it an issue. Both the American Bankers Association and the Independent Community Bankers of America were recently on Capitol Hill, aggressively lobbying Congress against the CU tax exemption. In fact, the ABA lists “Fighting the Credit Union Tax Exemption” as one of its top priorities, and devoted an entire session to the topic at its recent conference.
To further complicate matters, right now Congress is undertaking a complete overhaul of the U.S. tax code. And I’m not talking about just going through line by line and deciding what stays and what goes. This time, they’re starting from a blank slate. So for the first time, we find ourselves in a position of having to advocate for why our long-standing tax exemption should be put into the code, and we do so at a time when we’re facing vocal opposition from the other side.
But the news is not all grim on this front. While anything can – and often does – happen on Capitol Hill, we have good reason to believe that our tax exemption is not in immediate jeopardy. We’re very fortunate to have two Michigan congressmen, and two good friends of credit unions, serving on the House Ways and Means Committee, which is the group in charge of the tax code overhaul I just described. In fact the chair of that committee is our own Michigan Rep. Dave Camp, and the ranking member of the committee is Michigan Congressman Sander Levin. I can assure you that both of these lawmakers understand and appreciate the credit union difference. We’ve been in constant communication with both congressmen about the importance of the credit union tax exemption, and a representative from Congressman Camp’s office even participated in the Mid-Michigan chapter’s recent legislative breakfast. In early June, we’ll head back to Washington to Hike the Hill and the importance of the CU tax exemption will be one of our top priorities in our discussions with lawmakers.
We can’t afford to be passive on this issue, and that’s why I urge you to educate yourselves and to encourage your lawmakers to be vocal in their support of the credit union tax exemption.
The Joint Committee on Taxation estimates about $500 million in unclaimed government revenues in 2012 from the credit union tax exemption, however CUNA estimates that credit unions gave $8 billion back to their members in the form of low fees, low rates and other benefits.
Remind your lawmakers that credit unions are exempt from federal and most state income taxes because they are member-owned, democratically operated, not-for-profit cooperatives, managed by volunteer boards of directors. Remind them that credit unions are of the community, in the community, and serve the community. For a modern-day example of how important the credit union option is for Americans, remind them to look no further than how credit unions responded during the financial crisis, when Americans saw credit unions as a safe haven in the financial services sector -- more than 2 million Americans joined credit unions in 2012 alone! Remind them that credit unions continued to lend to consumers, homebuyers and small businesses when other lenders were unable or unwilling to do so.
And remind them that there are serious policy implications that would come with a reversal of this long-standing exemption, because a tax on credit unions would be a tax increase for millions of credit union members. Today, 96 million Americans use credit unions to conduct financial services – building savings and accessing credit, and a tax on credit unions would adversely affect them.
The credit union tax status still serves the purpose for which it was created. If credit unions are taxed, there would be no incentive for them to remain not-for-profit; the large credit unions would likely convert to banks; the small credit unions would likely liquidate; and our economy will lose the only sector of the financial industry that is not driven by profit, but rather driven by a dedication to serve its members.
Again, the legislative environment for tax reform is extremely fluid, and that’s why it’s important to prepare NOW for a major advocacy effort. As part of that, we ask that you and those that work and volunteer for your credit union promote the credit union difference, and the good that it allows us to achieve in our communities and for our members. MCUL has provided a CapWiz communication that credit unions can use to contact their lawmakers, to highlight the reasons for the exemption and why continuing it is good public policy. Credit unions can use this to begin these all-important communications – with this letter, and others that will periodically be provided throughout the tax reform process, we ask that you commit yourselves to communicating with your lawmakers about the importance of and reason for the exemption, what it enables credit unions to do and what credit unions mean for our members and our communities. MCUL and CUNA have also prepared issue briefs and other materials to assist your efforts, and those can be found on our website as well. You’ll find much more information and links to these materials in this month’s newsletter and, of course, we’ll continue to update you on developments, but in the meantime, let’s all do what we can to educate ourselves, our staff, our members and our lawmakers about the credit union tax status.
As always, I welcome your comments and feedback.
View the “Michigan Priority Report” on CUBE TV for a video summary of MCUL & Affiliates CEO David Adams’ May Priority Report introduction.