For more than 40 years, Purdue Federal has been serving you—our member—and the community through competitively priced products and services as well as generous contributions of money and time to local not-for-profit organizations.
As a member of the credit union, we feel it's important to inform you of some potential federal decisions that may impact you and your credit union. Congress is currently working on tax reform and some congressional members are considering imposing a tax on your credit union—a tax that we've never paid before.
You may or may not be aware, but credit unions were formed in the 1930s by congress as not-for-profit member-owned financial cooperatives, meaning we're exempt from federal and state income tax. But this tax exemption does come with tight regulations. We are very limited in the types of risks we can take and who can qualify to be a member. While we don't pay federal income taxes, we do pay state property taxes, sales taxes and all of the payroll-related taxes.
Purdue Federal, like other credit unions, is similar to a bank in some ways. We offer financial services and products emphasizing quality, service and value and our employees have extensive experience helping people chart a smart financial future. However, credit unions are unique from all other financial service providers, including banks. Unlike banks, we're not-for-profit and we're owned by you—our members—instead of shareholders.
Every dollar earned beyond the taxes we pay is used to cover operational expenses, or saved in reserves to cover ups and downs of the economy. The remaining income is given back to you in the form of better rates and lower fees, as well as a variety of other member benefits.
In fact, the Credit Union National Association recently determined that Purdue Federal provided more than $4.3 million dollars in direct financial benefits to our 61,225 members during 2012. That means, on average, our member households each received approximately $136 dollars in direct financial benefits while our loyal high-use households received more than $1,400 dollars in direct financial benefits in 2012.
Our primary motivation isn't money—it's helping you, the member, improve your financial well-being. We don't have investors. We don't issue stock. We're financial cooperatives that operate with your interests as our top priority.
Our not-for-profit status also allows us to look beyond the bottom line. Credit unions invest time and resources in financial services and products that are genuinely beneficial to our members—focusing on their needs, not on generating massive returns. Our free credit counseling sessions, community financial education programs and support of community organizations represent perfect examples of this ethic. We earn our federal income tax exemption with our everyday actions.
But if credit unions were forced to pay federal and state income taxes, as not-for-profit entities, our members would shoulder the burden of those new taxes. We would be forced to make up the difference by charging higher rates on loans, paying less on savings, and implementing new fees, thus narrowing the gap between the credit union and bank structures. Even non-members would suffer, as conventional banks would face less competitive pressure from credit unions to keep their prices and fees low. Credit unions are a small industry surviving among very large for-profit banks. Our taxable revenues are miniscule in comparison to the large banks in our country so a tax on credit unions will not solve the nation's fiscal challenge.
As a not-for-profit, cooperative credit union, we're here to help you. But in order to continue helping you, I am asking for your help. We rarely ask for our members to become involved in national politics, but this issue is too important for us to not ask for your help. It's important that our elected officials understand the benefits of credit unions' non-profit status. If you are interested in maintaining the credit union system as we all know it today, please let your legislators know how important it is to protect credit unions from taxation. We have included a link to Indiana's Voter Voice that will help you send an automated letter that can be customized to your legislators. We've also provided some additional resources on this site to help you better understand the potential tax reform implication or you can simply email me at firstname.lastname@example.org. I would be happy to answer questions you have concerning this issue.
President & CEO
Purdue Federal Credit Union
Here is how you can help.
We have created several very simple approaches for you to get involved without taking much of your valuable time. We appreciate any effort you can give.