Impact of Tax Reform on Credit Unions

As you may have seen, the new tax bill signed by President Trump includes provisions that affect tax-exempt organizations. While I believe all of the provisions impacting tax-exempt organizations should be reviewed, there are a couple that stand out as specifically impacting credit unions.

  1. For state chartered credit unions that file a 990T, there is no longer the ability to offset income and losses from different lines of business to reduce or eliminate taxable income. For example, taxable income generated from insurance products such as car warranties can no longer be offset from losses generated from non-member ATM usage.
  2. While most credit unions do not have executives making more than $1 million, there can be circumstances with vesting years of deferred compensation plans and other circumstances where there could be a year when certain executive compensation exceeds $1 million. Any amount in excess of this $1 million is subject to an excise tax at the corporate tax rate, which is 21 percent for 2018. From what I have determined, this applies to federal and state chartered credit unions. We do have people on staff that can assist in looking for opportunities to modify plans and can help limit or avoid this excise tax.

Please contact Dean Rohne if you have any questions.

He can be reached at dean.rohne@claconnect.com or 507-434-7046.

  • Financial Institutions Principal
  • CliftonLarsonAllen
  • Peoria, IL
  • 309-495-8842

Amanda Garnett is a principal in the financial institutions practice of CliftonLarsonAllen from Peoria, Illinois. She currently leads the firm’s Midwest financial institution tax team and serves institutions ranging in size from $15 million to $3.5 billion in total assets. In addition to tax compliance, Amanda assists clients in the areas of tax consulting, mergers and acquisitions, and regulatory reporting. She also routinely teaches courses for banking associations across the country.

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