Friday, July 12, 2013

Don't Tax My Credit Union

Congress is currently considering a total re-write of the tax code that could impact North Alabama Educators Credit Union. The bankers of course are leading the effort to remove the tax exempt status of credit unions as they claim credit unions have an "unfair" advantage over banks since credit unions do not pay corporate income taxes. Unfair advantage? As of December 2012, the credit union industry in Alabama maintained a whopping 7.2% market share of assets held by all financial institutions in the state. Banks, Savings & Loans, and Savings Banks held 92.8% of all assets within the state of Alabama. Clearly, banks are not being harmed by credit unions.

It is also interesting to note that 1/3 of all banks within the state of Alabama are organized as Subchapter S Corporations that do not pay corporate income taxes. The Subchapter S Bank Association, Inc. reports that roughly 1/3 of all financial institutions in the entire country are now organized as Subchapter S Corporations. These banks are not paying corporate income taxes and offer none of the true credit union benefits of higher savings rates on deposits, lower rates on loans, and reduced or no fees on services.

Credit unions in the marketplace keep the banking community honest on rates and fees. Recently, North Alabama Educators Credit Union helped a member to refinance her vehicle loan that had been financed through a bank at a dealership. This member, with a good credit score above 700, was charged a high rate of 13.00% APR with a bank. The credit union was able to refinance that loan at a much lower rate of 3.10% APR and provide a much lower monthly payment!! Credit unions make a difference in people's lives and this was an excellent example.We have also seen examples where a bank will lower their rate to match our rate at a dealership to finance the purchase. The credit union was the only reason why the lower rate was offered in these cases. Again, another example of credit unions helping consumers.

We are asking our members to visit and review the issue at hand regarding the tax exemption status of credit unions. There is an excellent short video on the web site explaining the issues. Members are encouraged to send along their comments to Congress via a contact link on the linked page. Members own North Alabama Educators Credit Union. A corporate tax on North Alabama Educators Credit Union would be a tax on each of our members.