Unlike banks, credit unions earn tax-exempt status by reinvesting in their members | Opinion

It’s 2021. The country is still dealing with a global pandemic and its effects. There are millions of unemployed Americans, after businesses were forced to shutter their doors, and more than 500,000 people in our country lost their lives to COVID-19.

You would think all of that would lead the Florida Bankers to pull up their bootstraps and figure out a way to help the country recover. You would think their focus would be on how they can build more branches in underserved areas and enjoy the fact that their profits are soaring despite scandals.

But in his May 5 op-ed, “Biden, Congress must tackle national debt before it brings down this nation,” Alex Sanchez, president of the Florida Bankers Association, targets credit unions, which are exempt from corporate taxation.

But what Sanchez didn’t say is that credit unions are exempt from corporate taxes because they are not-for-profit financial cooperatives. Credit unions, because of their structure and the fact they invest all of their earnings back to their members and communities, remain tax-exempt entities. This exemption has been reviewed by Congress several times, most recently during the comprehensive tax-reform efforts in 2017. And, once again, Congress spoke loudly, saying credit unions continue to earn their exemption every day. That same effort, the Tax Cuts and Jobs Act (TCJA) of 2017 resulted in an annual tax cut for U.S. banks averaging $30 billion per year — 15 times the size of the credit-union tax status.

In Florida alone last year, deposits in banks increased by $105 billion, 45 percent more than all of the deposits accumulated by Florida’s credit unions since they began operating in the state almost 100 years ago.

Also in 2020, Florida’s credit unions provided more than $637 million in direct financial benefits to the state’s 6.2 million credit union members. That’s $103 per member and $215 per household. Florida credit unions were able to do this despite having only 9.2 percent of the market share in Florida, slightly above the national market share of 7.9 percent.

Looking at this from a national level, the credit unions’ tax status is not an unfair advantage. Every year, credit unions contribute more than $17 billion in federal, state and local taxes. Credit-union members pay more than $1.5 trillion in income taxes annually. Imposing an income tax on credit unions would raise enough revenue to run the government for only 2.7 hours. Instead, that money is used by citizens to purchase tangibles, such as homes and cars. It benefits people and communities served by credit unions.

Sanchez wants everyone to believe that taxing credit unions is the answer to solving the national debt. That’s ludicrous — plus, the premise is flawed in the math. If Congress were to impose federal income taxes on credit unions, it would not raise the amount of money Sanchez thinks, and it would likely result in a deleterious change to the credit union system. This could result in a bank monopoly, which is what I’m sure Sanchez wants.

Finally, Sanchez says that banks have no such tax-exempt status, but what he doesn’t say is that there are 21 subchapter S banks in Florida that do not pay federal corporate income taxes; rather the taxes are paid by the shareholders, much like members of a credit union. If Florida’s banks were structured like credit unions, the $4.9 billion paid in stockholder dividends over the past decade would have instead been enjoyed by members.

If it is so easy being a credit union, we welcome all banks to convert their charters to credit unions, forfeit their billions in profits and join in the movement of people helping people.

Jared M. Ross is president of the League of Southeastern Credit Unions & Affiliates.