Brought to you by:
• Credit Union and Farm Credit System Tax Exemptions
date back 80 and 100 years
• Tax Code should not create winners and losers – like
businesses should be treated the same
• South Dakota Bank Franchise Tax
Tax Policy Fundamentals
Credit Unions Pay No Tax
• Federal Income Tax
• South Dakota Bank Franchise Tax
• State or Local Sales Tax
Farm Credit Services – pays only a nominal amount
Banks pay Federal Income, SD Bank Franchise and Sales Tax
Federal Law Protects
Some Providers
•
Credit Unions – $1 trillion tax exempt industry
• Net Income of $9 billion in 2012
• Evolution of Credit Unions to a “Community Charter” - growth focus – with limited interest in
people of modest means
•
Farm Credit – $250 billion arm of Federal Government
• Net Income of $4.3 billion in 2012
• Return on Assets of 1.74%
• Limited interest in serving young, small, beginning producers
•
New Revenue Would Help Reduced Federal Deficit
• Credit Union Exemption
= $2 billion
• Farm Credit System Exemption
= $1.3 billion
Why should Congress
Repeal the Exemptions?
49%
41%
40%
31%
Banks
Credit
Unions
Percentage of Customers
with Low-to-Moderate Income
Banks
Credit
Unions
Percentage of Customers
with Upper Incomes
Banks Serve More People
of Modest Means
• 80 to 90 % of loans are to older, well-established larger
farmers
• 1,714 South Dakota Farm Service Guaranteed loans 99% were underwritten by Banks (as of 7/31/13)
• FCS – financed luxurious vacation home for Hollywood
producer in Black Hills
Farm Credit – Mission
Challenged!
FARM CREDIT: Mission
Challenged.
• National Stakeholder
• You pay income taxes, Credit Unions don’t – Farm Credit
Pays a minimal amount
• Local Stakeholder
• South Dakota’s Bank Franchise Tax benefits important
programs - state and local
Why is this important to
you?
SD Bank Franchise Tax
$80,000,000
$70,000,000
$60,000,000
$50,000,000
Local
$40,000,000
State
$30,000,000
$20,000,000
$10,000,000
$FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
8 year avg. - $485,800
8 year avg. - $203,300
8 year avg. - $64,400
8 year avg. - $59,500
Annual Cost of Tax Exemptions for South Dakota
• Credit Unions
• Farm Credit
$1 Million
$4 Million
• TOTAL
$5 million*
• Local Government Share = $3.7 million
(*Doesn’t include lost sales and use tax revenue on products
and services purchased by federal credit unions)
Cost of Protecting Status
Quo - South Dakota
• Bipartisan Congressional Focus on writing a simpler,
more efficient, fairer tax code.
• “Blank Slate Approach” – replace current policies that
benefit special interest groups
• Eliminate exemptions & increase taxable income
• Lower rates across the board
Tax Reform
• Sign petition of support
• Contact Senator Thune, Johnson and Representative Noem
• Support tax reform, including repeal of tax exemptions for
Farm Credit & Credit Unions.
• Contact our your local Legislators
• Support 2014 SD Legislature Resolution of support
THE TIME TO ACT IS NOW
It’s time to take action
• 44 South Dakota Credit Unions
• Assets = $2.6 billion Income = $21 million (2012)
• Black Hills Federal Credit Union nearing $1 billion
• SD’s Community Chartered Credit Unions
• 28 Charters (63%) and $2.4 billion assets (93%)
• SD’s Multiple Bond Credit Unions
• 12 Charters (28%) and $118 million assets (5%)
• SD’s Original Single Bond CU’s
• 4 Charters (9%) and $55 million assets (2%)
South Dakota’s Credit
Unions