On October 5th Congress took its first major steps towards tax reform when the U.S. House passed a $4.1 trillion budget resolution and the Senate Budget Committee passed a similar (but not the same) bill. This maneuver triggers a legislative process called “reconciliation” where a tax reform bill could be passed with a simple majority of 51 votes in the Senate, instead of the usual and more challenging 60-vote requirement. This process is expected to result in the enactment of major tax reform later this year, but the hard details of what will change and how wide-reaching the changes will be are yet to be seen.
As the idea of tax reform is being pursued, there is already fracturing in Congress around what common ground a potential tax reform package could contain – and of note for credit unions, which deductions could be eliminated. Outside of anyone’s personal opinions and preferences on what should or should not be eliminated in a tax reform package, this effort is something credit unions will need to watch closely, as anything could be on the chopping block to pay for tax cuts.
Why? Beyond the simple aspect of the need to be engaged in the legislative process, there are efforts of others in Congress that are contrary to what is positive for credit unions. While credit unions pay some taxes, they are not subject to income tax – something that the for-profit financial sector reminds Congress of continuously. The not-for-profit structure of credit unions is worth protecting not just for the tangible return to consumers (over $13 billion nationwide annually), but also for the positive return to the consumer due to the intrinsic nature of being motivated by what is best for the member, compared to what is best to maximize profits for a handful of shareholders. Stay tuned for more information as tax reform is being considered in Congress.
