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Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release March 23, 2005 #05-10
E-mail: [email protected]

ACB URGES PRESIDENT’S TAX PANEL TO RECOMMEND ENDING CREDIT UNION TAX EXEMPTION, PROVIDING RELIEF ON INTEREST

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WASHINGTON, D.C. – America’s Community Bankers has urged the President‘s Advisory Panel on Federal Tax Reform to recommended correcting two unfair aspects of the tax system by repealing credit unions‘ tax exemption and providing tax relief to individuals for interest earned on deposit accounts. ACB was responding to a request for comments from the president‘s panel.

“The free market is frustrated by those tax-exempt credit unions that compete head-to-head with taxpaying community banks, particularly those that are in mutual form,” said Robert R. Davis, ACB‘s executive vice president and managing director of government relations.

“We urge the panel to investigate this government-created competitive disparity and help create a level playing field between community banks and sophisticated credit unions.”

Credit union conglomerates offer diverse, high-end financial products and services, including commercial loans, brokerage services, mutual funds and insurance products. “Taxing bank-like credit unions or providing tax relief for community banks should be a priority for tax reform,” Davis said.

He also noted that many credit unions have formed subsidiaries known as credit union service organizations that offer sophisticated products such as trust administration and investment services, and such non-financial services as real estate brokerage, pre-paid legal service plans and travel agency services. “Income generated from bank-like products and non-traditional financial services offered through CUSOs should not be exempt from taxation,” Davis said.

ACB also proposed a $1,000 tax exemption for interest on deposit accounts paid to individuals. This would give interest in deposit accounts comparable treatment to dividends and capital gains, which are taxed at 15 percent. Interest from deposit accounts is taxed an owner‘s effective income tax rate.

ACB urged preservation of the home mortgage interest tax deduction, which President Bush has already declared off limits. But ACB urged maintenance of the deductibility of all interest paid on loans secured by home real assets, including home equity loans and first deed of trust mortgages. “The federal tax system should continue to encourage and support this important tool for building wealth,” Davis said.

ACB also urged the panel to recommend incentives for saving. “ACB believes that tax reform proposals should encourage Americans to save for more financially secure futures,” Davis said.

The letter to the Advisory Panel is attached.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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