Credit unions pay taxes, put focus on members

The Aug. 18 letter by Dale J. Torpey (“End tax subsidies for credit unions”) is an unfortunate example of a banker not understanding the basic premise of credit unions. Credit unions, as not-for-profit, financial cooperatives, are focused on serving our member-owners, not maximizing profit for a select number of bank stockholders.

Some facts:

l State-chartered Iowa credit unions do pay taxes - moneys and credits tax on their growing reserves, payroll taxes, sales taxes, and property taxes. Because credit unions are not-for-profit cooperatives, they're exempt from federal income tax.

l 216 Subchapter S elective status is a corporate tax status for state and federal banks and thrifts that eliminates federal income taxes at the corporate level. Shareholders are then taxed on their portion of the corporation's taxable income (similar to how credit union members are taxed on their dividends). At the end of 2010, 60 percent of all banks chartered in Iowa held Subchapter S status.

l Credit unions' earnings are returned to all members in the form of lower interest rates on loans, higher returns on savings and lower fees. In 2010, Iowa Credit Union members saved more than $72 million compared to what they would have paid in fees/rates or earned on their savings had they done business with a bank. That's $78 per member.

If Mr. Torpey believes credit unions have it so great, I encourage him to convert his bank to a credit union.

Jim Hagerman

CEO, Linn Area Credit Union

Cedar Rapids