This preferential tax treatment afforded credit unions and FCS lenders gives these institutions potentially tremendous pricing advantages over community banks. The tax exemption afforded these institutions allows them to build capital tax-free. This enables these institutions to grow faster and to expand their market share at the expense of community banks. There is no justification for the tax-exempt status for credit unions and certain Farm Credit System entities while community banks, which must compete in the same markets, are subject to taxation. The Working Group concluded that all providers of retail financial services should receive equivalent tax treatment, advancing the following alternatives to bring about tax parity.
Community banks play a key role in helping their communities flourish.
They provide the credit to help small businesses get started and to help them grow - creating jobs in their local community. Banks make loans to consumers to finance a home, an education, a car, or a major appliance. Unfortunately, the growing tax burden on community banks is making it more difficult for community banks to fulfill their mission. The Working Group believes that those banks that meet certain community lending criteria should be given tax relief. Moreover, it will benefit small businesses and consumers by increasing the volume of credit and making credit more affordable, thus maintaining the economic viability of communities throughout this country.