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The Advocate - Legislative Update
Thursday, July 18, 2013 8:00 AM


Tax Exemption

Cornerstone President Dick Ensweiler sent a letter to Senator Cruz and Senator Cornyn on July 11, 2013, requesting their assistance in preserving the credit union tax exemption. Included in the letter was a detailed report from the CUNA Economics and Research Department regarding the impact on Texas credit unions if the tax exemption were eliminated. This letter was part of a coordinated effort with CUNA in DC while meeting with key lawmakers who are working on the tax reform plan. While a specific date for filing the bill has not been released, it could be as soon as a few weeks to sometime in the fall.

Both the chairman of the House Ways and Means committee and the chairman of the Senate Finance committee are going around the country, meeting with interested groups regarding tax reform and asking what Americans are looking for in a tax reform bill. Small groups in both committees are working through the impact of changes to the tax law and how best to structure a bill.

Credit unions continue to email members of Congress in support of the tax exemption. Reports indicate that lawmakers are hearing the credit unions, but the drumbeat needs to continue through the entire process to let federal lawmakers know that the credit union tax exemption must be retained in any tax bill.

The Canadian CU Tax INCREASE

To add some perspective to the federal tax fight, in 1972, Canadian credit unions gave up the fight to preserve their tax-exempt status and cut a deal with their legislators. At the time, they received a lower tax rate than other financial institutions; however, the story has taken a turn for the worst, as the following article reveals:

Canada: Beneficial Income Tax Rate Eliminated

Canadian credit unions will be paying more income tax. A surprise March 2013 announcement by the Canadian government hiked the credit union federal tax rate from 11% to 15%. This reversed a 40-year-old policy that ensured credit unions were taxed at a lower rate than their big bank competitors. The announcement targeted only credit unions — no other businesses face tax increases.

Credit unions first became taxable in 1972. Since then, they have enjoyed the preferred small business tax rate in recognition of their co-operative capital structure and that they are the small business of the financial services sector.

An active lobby campaign was launched to explain why taxing credit union more is poor public policy. As the tax rate increase will be phased in over five years, advocacy efforts are focused on creating offsetting concessions that will restore the competitive balance before the full tax impact is felt.

See Credit Union Central of Canada's website for further information:

Source: Credit Union Central of Canada,

The U.S. savings and loan industry has a similar history. Once tax exempt institutions, they decided to cut a deal and in a few years were paying the same taxes as banks.

Congressional Recess

During Congress's August recess, which starts on August 5, 2013, credit union leaders will have good opportunities to meet with their congressional lawmakers at home to talk about preserving the tax exemption. CUNA has developed several tools to assist credit unions in preparing for these meetings. You can find those tools at the following site:

Additionally, CUNA's "Don’t Tax My CU" tool kit provides newsletter articles and marketing materials that credit unions can access from the following site:

If you'd like to see how your credit union's tax would be calculated, click HERE for a PDF doc you can download.

Majority Rules, the CFPB, and Director Cordray

To further complicate Washington, DC, the US Senate has been in some tense discussions about the “nuclear option” regarding presidential appointments. Senate Majority Leader Harry Reid has proposed changing the rules to require only 51 votes to approve presidential appointees, from the current super majority of 60.

The longstanding rule has been in place to allow the minority to have a larger voice in the Senate—as opposed to the House, which operates on a simple majority. Legislative issues would not be affected by the proposed change.

The test vote came on July 16, 2013, over the vote to invoke cloture to consider the confirmation of Richard Cordray as the head of the Consumer Financial Protection Bureau (CFPB). Both Texas senators voted no on the motion to proceed with confirmation. However, the cloture vote passed 71-29, allowing debate to begin on the Cordray nomination. Later in the afternoon, the Senate confirmed Cordray to a five-year term as the first director of the CFPB, by a vote of 66-34. Cordray's initial confirmation was blocked by Republicans in Congress and comes seventeen months after President Obama nominated him to the position.

GSE Reform

Legislation to address funding issues at the Federal Housing Administration (FHA) is expected to move forward in the coming days. Financial Services committee Chairman Jeb Hensarling is developing legislation to address the Government Sponsored Enterprise's (GSE) Fannie Mae and Freddie Mac.

Chairman Hensarling's initial draft would eliminate the traditional 30-year mortgage, eliminate Fannie Mae and Freddie Mac over a five-year period, change the role of FHA to only handling loans for first-time homebuyers and low-to-moderate income homebuyers, and privatize the mortgage securitization process.

The Senate version of GSE reform is being pushed by Senators Corker (R-TN) and Warner (D-VA). Their plan would eliminate Fannie and Freddie over time and create a federal mortgage insurance company to provide catastrophic mortgage reinsurance. It would also create a standard for the secondary market while creating a securitization platform that allows banks and credit unions equal access to securitization. The conforming loan cap would be reduced to $417,000 over a six-year period.


Special Sessions

The 83rd Texas Legislature did adopt the Texas House, Senate, and Congressional redistricting plans approved by the federal court for the last election, with a few modifications during the first special session.

Then Governor Rick Perry recalled the Legislature for a second special session to address legislation on abortion, transportation infrastructure, and juvenile justice after the first special session ended in a highly publicized filibuster by Senator Wendy Davis.

The three issues under consideration during the second special session are moving through the process and, if everything goes according to plan, are expected to culminate this week with final passage in both chambers. Differences between the House and Senate regarding the method of funding transportation infrastructure projects are still unresolved, though, and may require the full 30 days to finish.

There are no specific legislative issues being addressed relating to credit unions during this second special session.

Hot-Button Regulatory Concerns

Currently, there are several pending regulatory proposals that affect Texas credit unions. The Texas Credit Union Department (TCUD) and Office of the Consumer Credit Commission (OCCC) have proposed several rule changes and are seeking comment from credit unions. 

Please refer to the July 12 issue of InfoSight from the Cornerstone Regulatory Team, which explains the impact of these proposals. These proposals are also available on the Texas Register.

Here's a quick rundown of issues you'll want to address before August 3, 2013:

  • Unmanned Teller Machine rule changes (applicable to both federal- and state-chartered credit unions).
  • Property Tax Lien Lender Rule.
  • Documentary Fees on Retail Installment Contracts.
  • Payoff Lending Fees.

Cornerstone Credit Union League requests your feedback and comment letters regarding the potential impact of these proposals on your credit union.

Please email your comments regarding the proposed rule changes to Suzanne Yashewski, SVP of Regulatory and Compliance, at, as soon as possible. If you have any questions, please contact Suzanne at 512-853-8516.


Meet Your Advocacy Team

The Arkansas contingent of Cornerstone Credit Union League is taking to the road! Come enjoy lunch and meet your new Cornerstone advocacy team:

  • Reta Kahley, President, Arkansas Credit Union Association
  • Jim Phelps, VP, Advocacy and Chapters, Cornerstone Credit Union League
  • Gretchen Ziegler, Executive Director, PAC, Cornerstone Credit Union League
  • With special guest Meredith Hurt, Political Programs Manager, Credit Union National Association (CUNA) and Credit Union Legislative Action Council (CULAC)

Just some of the topics the team will cover include PAC/CULAC payroll deduction, the national "Don't Tax My CU" campaign, the regional CU: ROAR initiative, and advocacy efforts to increase political engagement.

These “Meet Your Advocacy Team” luncheons will be held from 11 a.m. to 1 p.m. in the following locations:

  • August 20, Fort Smith
  • August 21, Little Rock
  • August 22, Pine Bluff

Watch your email box for more details to follow soon!