S.D. bankers urge end to credit union tax breaks
SIOUX FALLS (AP) – The South Dakota Bankers Association wants Congress to eliminate tax exemptions for credit unions and the Farm Credit System, arguing those tax breaks have outlived their initial purposes and deprive federal, state and local governments of revenue.
The Bankers Association contends that credit unions no longer serve their original purpose of helping people of modest means. If credit unions are operating like banks, they should pay their fair share of taxes, the association says.
“I think there’s certainly support for tax reform. The government is operating an unsustainable pace of spending, and we’re wrestling with where we go as a country from a fiscal perspective,” First Premier Bank President Dave Rozenboom, an association member, told the Argus Leader.
Credit unions, created in the Great Depression to offer financial services to those who couldn’t get help from a bank, do not pay federal income tax, the state bank franchise tax or sales tax on products and services. They do pay property taxes.
Robbie Thompson, president and CEO of the Credit Union Association of the Dakotas, said banks have challenged credit unions’ tax exemptions before, but Congress has kept those exemptions because they are good for credit union customers. Credit unions return profits to members in the form of lower fees, better rates and dividends that are taxed.
The government-sponsored Farm Credit System was formed in 1917 to serve agriculture as a cooperative. Profits are returned to farmers and ranchers or retained for their benefit.
Doug Stark, president and CEO of Farm Credit Services of America, said it makes no sense to change the rules for a cooperative owned by its customers.