Special Message from Sean Wells, CEO, IAA Credit Union

[ 5 ] May 30, 2013 |

Sean-Wells Don’t Tax my Credit Union!

There is a matter of urgency brewing in Washington D.C. which directly affects your wallet.  Got your attention?  You may have heard that politicians are considering an overhaul of the federal tax code, I want to alert you that the ideas being discussed could greatly harm IAA Credit Union and our members (You).

As a member, you know that IAA Credit Union is owned and directed by you.  Unlike banks that maximize profits for a small group of investors, credit unions exist to serve our members.  Because we return benefits to our members, we are able to offer higher returns on savings and lower fees, resulting in more money in your wallet.

Credit unions have been exempt from paying income tax since 1916, when the income tax was first instituted, because we are, according to the IRS, “organized and operated for mutual purposes and without profit.”  Now banks and some politicians in Washington are talking about taxing credit unions, despite the fact that we are not-for-profit.  They say we can balance the budget by taxing credit unions, even though credit unions hold only 6% of all financial assets nationwide, and banks hold the rest.

IAACU uses our members’ deposits to lend to other members.  As a not-for-profit, member-owned institution we then return the income generated from loans and investment to our members in the form of lower costs and higher returns on the products and services you use.  Taxing credit unions would decrease the amount that we can give back to our members.  So taxing credit unions is really just another tax on you, the member.

I urge you to send a strong message to Congress: “Don’t Tax My Credit Union.”  It’s easy to take action: just visit Don’t Tax My Credit Union to contact your U.S. Representative and Senators.  While there, you can also watch a video, follow the national credit union campaign on social media, and learn more about how you can help us tell Congress, “Don’t Tax My Credit Union!”

There are 96 million credit union members in the United States, 14,500 are IAACU members.  Our members are the best spokespeople we have, just think how powerful your voice, added to the voice of 96 million other credit union members could be!  We are hopeful that Congress will take note of how this issue impacts the people who depend upon credit unions.

Thank you for your continued support of IAACU!

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Category: CEO Corner

About the Author ()

Sean has held the position of Chief Executive Officer at the IAA Credit Union since June of 2005. In this position, he is responsible for the overall management of the $200 million financial institution, assuring financial strength while providing maximum value to its members. Also, he ensures that the Credit Union complies with all State and Federal laws and operates within the policies and expectations of the IAACU Board of Directors. He is a 1986 graduate of Illinois State University where he received a Bachelor of Science Degree in Agribusiness with a minor in Economics. He has also completed the coursework and received the CPCU, ChFC and CLU insurance industry designations. Sean served a combined 20 years in the United States Air Force and Air National Guard as an Aircraft Maintenance Officer retiring in 2002 at the rank of Major. Sean and his wife Kim have five children and reside northeast of Eureka, Illinois in Woodford County.

Comments (5)

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  1. Gary Price says:

    Mr. Wells,

    Is this not a time for Credit Unions to possibly take a contrarian viewpoint on this? To many corporation and entities want to pay nothing, no one really want’s to pay taxes.

    I believe it’s both spending and tax avoidance that has gotten our country in a weak fiscal situation. Don’t get me wrong, I’ve been a credit union member since 1983 and understand the value they bring to the community and overall marketplace.

    I see a potential threat from banks if they start to point the finger at Credit Unions as closed/limited institutions, that don’t benefit everyone and don’t pay taxes.

    This type of message could backfire. Make sure alternative communications are prepared by the CU community.

    Sincerely,
    Gary Price

    • Sean Wells says:

      Mr. Price,

      Thank you for your thought provoking post and for your support of credit unions over the past 30 years. It is apparent you are knowledgeable on this subject and I appreciate an opportunity to have this dialog.

      In response to the credit union tax exemption, I try to look past my personal connection to credit unions and consider the tax paying citizen’s viewpoint. I agree with your comment regarding overall attitudes with regard to entities and individuals on paying taxes. However I do support that one should not receive the benefits of taxation such as roads, schools, national security, etc., with an attitude “someone else will pay for it”.

      The overall message which has been presented regarding credit unions and taxation is: “credit unions don’t pay taxes”. But credit unions do pay many taxes and fees, including payroll and property taxes. It is also important to note that share dividends paid to credit union members are taxed at the membership level.

      In 1934 the Federal Credit Union Act (FCUA) gave credit unions the federal income tax exemption because “credit unions are mutual or cooperative organizations operated entirely by and for their members.” The defining characteristics of a credit union, no matter what the size, remain the same today as they did in 1934—credit unions are not-for-profit cooperatives that serve defined fields of membership, generally have volunteer boards of directors and cannot issue capital stock. Credit unions are restricted in where they can invest their members’ deposits and are subject to stringent capital requirements. A credit union’s shareholders are its members and each member has one vote, regardless of the amount on deposit.

      IAACU exists to serve our members and advance their financial well-being. Our income is used to pay operating costs and create regulatory capital to safeguard our members’ deposits. Contrary to the business model of banking whereby income is generated to pay operating expenses and maximize return for stockholders. I’m not advocating credit unions over banks, just pointing out the difference in how the income, to be taxed, is used. If a credit union exceeds the regulatory capital requirements excess revenue is returned to their members in the form of better rates and/or an extraordinary dividend.

      If Credit Unions lose their tax exempt status it would adversely impact savings and borrowing rates as well as increase fees and further restrain their ability to raise capital. A tax on a member owned not-for profit is an additional tax on its members.

      Thank you for your comments.

  2. Steve Heissler says:

    Not to get too political here, but wouldn’t we all benefit if we didn’t have to pay taxes. Certainly our monies would go farther, would it not? Conversely our municipalities, states and federal government wouldn’t have anything to do. I do like nice roads, schools, parks, civic and cultural venues, security!

    Fairness in taxes reminds me of a sports analogy, skins v shirts. Those that hadn’t worked out or taken care of themselves were more likely wanting to be a shirt. Those that worked out and took care of themselves were more likely ok being shirtless. But my ideological view is we all need to have some skin in the game to be fair.

    Therein lays the debate. With a Nation and Congress of lawyers, we have made a very complicated tax code. Way too complicated for fairness and a code which discourages savers from paying taxes while encourages spenders to spend and sometimes recklessly.

    So for now, I would prefer to protect my CU from further taxation, as they have been good stewards of my money and provide the most bang for the buck. If only other not-for-profits would be so sensible.

  3. DE Johnson says:

    Is this related to passing Fair Tax laws? My guess is that it is not.

    More taxation will not hold our representatives accountable, which is what we need. Taxing credit unions is not the answer – fiscal accountability is.

    Taxes should be used to build roads, secure our country, educate our citizens, & help those who truly cannot help themselves. Once instated, taxes don’t go away.

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