IRS Proposal Not Included as CA & NV Credit Unions Lead Fight

Rep. Lou Correa (D-CA, Santa Ana)
Rep. Lou Correa (D-CA, Santa Ana)

Initial language within the Build Back Better Act in Congress reveals the Internal Revenue Service (IRS) reporting-requirement proposal is NOT in the bill, a testament to the power of advocacy among credit unions, their members, the California and Nevada Credit Union Leagues, and the Credit Union National Association (CUNA).

From here, the path is unclear as House and Senate Democrats move forward with this legislation. The revenue side of the package appears to be settled, which gives the Leagues and CUNA confidence the IRS reporting proposal is resolved. However, nothing is final until it's final.

“This is an achievement for our grassroots strength, which saw over 785,000 communications sent to Capitol Hill from credit unions nationally — with nearly 10 percent from California and Nevada,” said Diana Dykstra, president and CEO of the Leagues. “Thank you to those who engaged your members, your staff, and anyone who was willing to push back against this measure!”

Over 67,700 letters from credit union supporters have been sent to congressional representatives from California and Nevada opposing the proposed burdensome IRS reporting requirement being discussed on Capitol Hill over the past several weeks. At this moment, credit unions can be confident their voices and letters have kept this harmful proposal out of the initial framework.

Latest Update: House Leader Kevin McCarthy
On Thursday morning — prior to President Joe Biden’s speech and following his meeting with House Democrats — the bill’s new framework was released. The IRS provision was not included in this plan, and the White House later confirmed the provision had been omitted. The legislative text also confirms the 15 percent corporate mandatory tax does not apply to credit unions.

At the same time, House Republican Leader Kevin McCarthy (R-CA, Kern County) held a press event on the topic and invited Eric Bruen, CEO of Desert Valleys FCU, as the sole participant from the financial services sector. Bruen did a fantastic job, as encapsulated by this tweet from Leader McCarthy.

The team at the Leagues and CUNA remain heavily engaged and are monitoring developments. There are some provisions and funds that will apply to credit unions for lending purposes. Credit unions should stay tuned for those positive developments.

Rep. Lou Correa Champions Key Opposition Letter
The Leagues’ effort this week began Monday morning when Rep. Lou Correa (D-CA, Santa Ana) began circulating this letter opposing the inclusion of the IRS measure. Over the past two days, the Leagues and CUNA have been working with a group of moderate and centrist Democratic representatives to pull together this letter.

It informs the speaker and chairman of the House tax-writing committee of the outright objection to the IRS reporting provision. With Democrats in power by only a slim margin, they can only afford to lose three votes on the spending plan. This letter demonstrates there are more than enough votes (21) to ensure the spending package cannot pass with the IRS piece included. That’s before the Senate has its consideration, where at least two Democratic senators have raised objections.

The Administration is still working on several different compromises of this IRS piece. However, the momentum has shifted in credit unions’ favor as public perception has moved steadily against the IRS reporting-requirement proposal.

Several signers in the letter are from California and Nevada. The Leagues and CUNA appreciate and applaud the leadership of Congressman Correa and his team for supporting credit unions’ position. Correa has been a long-time supporter of credit unions and is no stranger to the industry.

This letter follows a meeting the Leagues and CUNA had with senior U.S. Treasury Department officials last week.

NV League Meets with Senior Treasury Officials
In a meeting organized by Rep. Stephen Horsford (D-NV, Las Vegas), the Nevada Credit Union League was offered the opportunity to express its concerns over the proposed new IRS reporting requirements.

The Treasury Department, which oversees the IRS, is the agency promoting the Administration’s solution to the “tax gap” issue, which would have financial institutions and credit unions reporting gross cash flows of their members’ accounts. The idea is: closing this tax gap on high-income earners could raise enough revenue to more than pay for the Administration’s “human infrastructure” spending package currently in Congress, as well as address other budget issues.

The meeting was held with Deputy Treasury Secretary Wally Adeyemo, Deputy Assistant Secretary for Economic Policy Natasha Sarin, and Deputy Assistant Secretary for Tax and Budget Aruna Kalyanam. Secretary Adeyemo is second in line to Treasury Secretary Janet Yellen.

The Nevada League — including Board Chairman Matt Kershaw, President and CEO Diana Dykstra, and Vice President of Federal Government Affairs Jeremy Empol — were joined by the following CUNA officials: President and CEO Jim Nussle, Chief Advocacy Office Ryan Donovan, and Board Chairman Brad Green. Discussion was held for an hour on the contents of the IRS proposal, the difficulties of tax compliance with existing law, the functionality of the proposal (including the definition of “exempted wages”), the technical nature of segmenting income codes, and public perception and disproportionate impact on the unbanked.

While far from a place of resolution, the conversation with the deputy secretary and his team was productive — and at their urging. They recognized the community role of credit unions, were quick to point out their credit union membership (one in California), and support for credit unions’ work, especially with low-income and unbanked communities.

‘Connect for the Cause’ Letters
Credit union supporters can still send a letter to Congress via Connect For The Cause (email Emily Udell if you need guidance for activating your members).

You can also download, customize, and distribute the following Credit Union National Association (CUNA)-provided social media materials: Facebook post, Instagram post, and Twitter post. Please use these to redirect members to our Connect For The Cause webpage on this particular issue. To alter and edit a templated email for use in outreach to members, click here and scroll down.

On a different front, last week Republicans in the House of Representatives joined together in a letter sent to Treasury Department Secretary Janet Yellen opposing the Administration’s plan to include IRS reporting requirements for financial institutions. Signed by more than 200 representatives (12 from California and Nevada), the letter is a response to a previously signed version by 142 GOP representatives questioning the motives and intent of the IRS reporting-requirement proposal.

Also, in addition to signing a coalition letter organized by 106 associations opposing this proposal, the Leagues, CUNA, and the American Association of Credit Union Leagues (AACUL) sent a joint letter to Congress last week. It outlines how proposed revisions to the reporting requirements offered by Senate Democrats remains problematic and unworkable for credit unions.

Proposed IRS Requirement’s Burden
The proposed IRS requirement would amount to a major compliance burden on credit unions, as well as an invasion of their members’ privacy. The intention behind the proposed requirements is to go after tax cheaters, but it would unfortunately give the IRS new access to private information. Financial service providers would have to report gross cash flows of a certain amount on all their accountholders.

This almost assures that every financial institution, fintech, and depository will report information on every single accountholder. Please have your members send as many letters to Congress as possible!

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