With a multimillion-dollar embezzlement scandal leading to the closure opens in a new tabof a tax-exempt credit union just days after its former CEO pleaded guilty opens in a new tabto federal criminal charges, new polling data from the Independent Community Bankers of America (ICBA) shows strong public support for requiring tax-exempt credit unions to join the vast majority of nonprofits and file 990 forms. The polling data comes as the Treasury Department continues its Form 990 initiative to enhance transparency and strengthen reporting at nonprofit organizations.
“Amid a major embezzlement scandal at a credit union that until its failure enjoyed industry exemptions from both federal taxation and standard nonprofit reporting requirements, recent polling shows that consumers are fed up with the bevy of policies favoring these tax-exempt financial firms,” ICBA President and CEO Rebeca Romero Rainey said. “ICBA has long said lax oversight and limited transparency at tax-exempt credit unions have allowed this subsidized sector of the financial system to grow at the expense of tax-paying community banks and the communities they serve. As Treasury reviews Form 990 requirements, there is no better time for policymakers to start standing up to credit union mission creep.”
Reports on Embezzlement at Transparency-Exempt Credit Unions: The new polling comes after the former president and CEO of a tax-exempt credit union in Jackson, Miss., pleaded guilty to embezzling $69 million from the institution, which the National Credit Union Administration permanently closed due to insolvency and operating in an unsafe and unsound manner. The head of the now-defunct institution allegedly used the funds to finance a lavish lifestyle, including high-end cars, jewelry, and a custom “purse room” opens in a new tabto display a collection of designer handbags.
Views on Credit Union Reporting Exemption: The ICBA polling of U.S. adults conducted by Morning Consult in July found:
- 63% agree that credit unions should be required to file annual informational reports like other tax-exempt organizations, agreeing by nearly a 5-1 margin.
- 58% agree that the federal government should reconsider this reporting exemption as part of the current Treasury Department review, agreeing by more than a 3-1 margin.
- 57% say the alleged embezzlement by the former credit union CEO makes them more likely to support Congress reviewing the federal tax exemption for credit unions.
Other Public Concerns About Credit Union Policy: More broadly, the ICBA polling found:
- 59% agree that credit unions should be required to follow stricter regulations to justify their tax exemption, agreeing by more than a 3-1 margin.
- 61% agree that credit unions should be restricted from using their tax savings to purchase expensive equipment for use by senior executives, such as private jets.
- 56% agree that credit unions should be restricted from using their tax savings to finance high-profile marketing expenditures, such as purchasing the naming rights to major sports stadiums.
ICBA’s Calls for Enhancing Credit Union Transparency: ICBA recently told the Treasury Department opens in a new tabthat federal credit unions should be required to file Form 990, the annual information return required of nearly all tax-exempt organizations. Responding to Treasury’s Form 990 Transparency Initiative in line with ICBA’s repeated calls opens in a new tabfor Congress to require federal credit unions to file 990s, ICBA urged Treasury and the IRS to revisit the longstanding credit union exemption, noting the standard reporting requirements promote transparency and public accountability.
ICBA Resources on Credit Union Policy Reform: The renewed attention to transparency at tax-exempt credit unions follows a recent data analysis opens in a new tabfrom ICBA showing that credit union acquisitions of tax-paying community banks are harming small businesses and local communities while community banks outperform credit unions in serving high-poverty areas—the founding credit union role that Congress used to justify the industry’s tax-exempt status. Meanwhile, ICBA’s The Illusionists campaign opens in a new tab—which appears on streaming, digital, and print platforms—highlights how large credit unions grow through these acquisitions and regulatory advantages.
ICBA looks forward to continuing to work with policymakers to advance reforms that address the lack of transparency and tax and regulatory parity at tax-exempt credit unions.
About ICBA
The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation.
As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.