Until the end of the year, it was fair to say that Congress had been largely unproductive this year. Under divided control, Democrats with a House majority and Republicans with a Senate majority, Congress found it difficult to find common ground on legislative priorities for most of the year. The specter of impeachment over the last few months made it even less likely that there could be agreement on other issues. As it turned out, despite a House impeachment vote, Congress ended the year with a flurry of activity and agreement on several big issues:
- Avoided a government shutdown. The biggest accomplishment was the passage of two large appropriations packages that avoided a government shutdown and funded the federal government through September 30, 2020. The spending package included a few provisions of interest for credit unions that we’ll cover below.
- Passed key national defense legislation. Congress passed the National Defense Authorization Act (NDAA) that funds military activities and sets military priorities. Credit unions had been actively engaged in NDAA discussions because of a potentially negative impact on credit unions serving military bases. Currently, credit unions operating on military bases have the opportunity to operate rent-free in many cases. In the original Senate version of the NDAA, banks would have been afforded this same opportunity. Credit unions actively lobbied to have this provision removed from the NDAA fighting banking industry efforts to keep the provision in the legislation. Ultimately, the provision benefiting banks was removed from the final NDAA legislation.
- Came to agreement on NAFTA replacement. Early in his term, President Trump pulled the United States out of the North American Free Trade Agreement (NAFTA) that had governed trade between the United States, Canada, and Mexico since 1994. One of the administration’s top priorities has been to create a new trade agreement between the countries called the United States-Mexico-Canada Agreement (USMCA) but the partisan divide in Congress has made those negotiations very difficult. Ultimately, though, it appears that an agreement has been reached with the House passing USMCA in December and the Senate expected to pass it in January.
While none of these major actions have a significant impact on credit unions, the spending bills did end up including several issues of interest for credit unions that were actively supported by credit union advocacy efforts during the process:
- The spending package included bipartisan retirement legislation called the SECURE Act, which makes the first meaningful changes to American’s retirement savings options in many years. Among the changes are:
- An increase in the required minimum distribution age. Currently, people must begin taking a minimum distribution from their IRAs or workplace retirement plans at age 70 ½. For people turning 70 ½ after December 31, the minimum distribution age will now be 72.
- A repeal of the maximum age for making traditional IRA contributions. Currently, people over 70 ½ cannot make contributions to their traditional IRAs. The age limit has been removed.
- Expands 529 education savings plans to allow student loan repayments and the costs of apprenticeship programs to be qualified higher education expenses.
- Allows for penalty-free withdrawals from retirement plans of up to $5,000 within a year of the birth or adoption of a child.
- CECL Study. The legislation requires the Department of the Treasury to conduct a study (in consultation with the federal financial regulators including NCUA) on the need, if any, for changes to the regulatory capital requirements required by FASB’s Current Expected Credit Loss standard. The study must be conducted within 9 months of the law’s enactment.
- The legislation includes an extension of the National Flood Insurance Program through September 30, 2020.
- The legislation extends through 2020 a tax exclusion of up to $2 million for certain canceled mortgage debt income and eliminates the requirement for financial institutions to file the IRS Form 1099-C on a mortgage default involving an individual’s primary residence.
- The legislation would allow taxpayers to treat certain mortgage insurance as qualified residence interest through 2020.
- Minor UBIT relief. Major tax legislation in 2017 created a few new exposures to the Unrelated Business Income Tax (UBIT) for not-for-profit entities subject to UBIT, which includes state-chartered credit unions. One of the potential exposures was the application of UBIT to certain employee fringe benefits called “transportation and parking benefits.” In some circumstances this could require a not-for-profit entity to pay UBIT taxes on employer-provided parking and transit cost coverage. Not only could this have covered paid-parking but also potentially could have covered free parking offered in lots connected to the not-for-profits locations. The process for determining the potential UBIT tax likely included a cumbersome analysis of parking lots and spaces adjacent to not-for-profit organizations’ locations. It is not clear how many credit unions were impacted by this 2017 tax law change, but the potential UBIT tax on the transportation and parking fringe benefits has now been repealed as part of the year-end spending legislation.
- The spending packages include funding for three programs of interest to credit unions: a slight increase to $262 million for the Community Development Financial Institutions (CDFI) Fund; $1.5 million for the Community Development Revolving Loan Fund; and $17 million for the Cooperative Development Program that helps further programs at the World Council of Credit Unions (WOCCU).
In addition to continuing to tell the positive story of credit unions making a difference in their communities, the League will continue to press Congress for data security legislation that would make retail merchants more accountable for protecting the consumer data the collect and for additional regulatory relief, especially in the area of Bank Secrecy Act/Anti-Money Laundering (BSA/AML) laws throughout 2020.