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Cumbees speaks to forum about taxing credit unions

Posted: Monday, Jan 20th, 2014

Dakotaland Federal Credit Union President Dan Cumbee spoke to attendees of the Democratic Forum about the possibility of taxing credit unions.

HURON — Credit unions are fighting off attempts by banks to convince government bodies that all lending institutions should pay taxes.

“They feel we have an unfair tax advantage,” said Dakotaland Federal Credit Union President Dan Cumbee.

“If we were taxed like the banks, that’s a tax on our membership,” he said at the Beadle County Democratic Forum on Thursday.

Scheduled speaker Robbie Thompson, president of the Credit Union Association of the Dakotas, was on his way to Huron when, about half an hour after leaving Bismarck, his car went into the ditch in blizzard conditions.

Cumbee is a 27-year veteran of Dakotaland, the largest financial institution in the Huron area and the second largest credit union in South Dakota. It serves 12,500 members in Beadle County, but also has a 25-county charter.

In the last couple months, Kevin Tetzlaff, chairman of the South Dakota Bankers Association and president of First Bank & Trust of Brookings, has been making presentations before local government entities, trying to get elected officials to sign resolutions calling for the credit unions to be taxed like banks.

Credit unions are not subject to federal income taxes, state and local taxes and the bank franchise tax.

Cumbee said while credit unions don’t pay federal income taxes, their members do. The state bank franchise tax is an income tax on banks that dates to 1939.

“We don’t believe that a not-for-profit, cooperative credit union should pay that bank franchise tax,” he said. “One, we’re not a bank, nor are we a franchise.”

Local officials in Brookings have either tabled the resolution or have not signed it, he said.

Dakotaland Federal Credit Union at one time only served employees of the Armour & Co. plant.

When it had evolved to Dakota Pork, and then was closing in the late 1990s, the credit union was forced into survival mode and expanded into a community credit union.

Over the years, nine smaller credit unions have merged for efficiency. Huron remains the home office. The most recent satellite office to open is in Mitchell.

Dakotaland’s main base membership consists of low- to middle-class folks who work with the credit union in obtaining mortgage, small business and auto loans.

Cumbee said there is a significant difference between the business models of banks and credit unions.

“They focus on profits because that’s what they do; credit unions focus on service because that’s what we do,” he said.

It’s not the first time banks have tried to go after credit unions. Cumbee said he remembers being told about it when he was training for his first job at Dakotaland nearly 30 years ago.

The only motivation behind forcing credit unions to pay taxes like banks is to put them out of business, he said.

The loss of credit unions would mean one less option for consumers and their lending needs. Cumbee said he has no problem with the banking model – both options are needed.

“If they eliminate us they would be more profitable with more market share,” he said.

But he also pointed out that credit unions are no threat to banks. In South Dakota, banks have a combined asset base of $113 billion. Credit unions control $2 billion.

Cumbee likens that to a basketball game.

“You’re behind 113 to two,” he said. “That’s what the score is in South Dakota, and yet the banks are concerned we’ve become a threat or that we are too successful.

“Our success is service to our membership,” he said.

Credit unions are nonprofit and not out to make money, but they have to make enough to keep the doors open, he said.

On the growth side, credit unions expanded by 4 percent in the year ending June 30, 2013, while banks grew 22 percent.

“So we’re really no threat to them,” Cumbee said. “We just really want to be left alone.”

Dakotaland also is successful because it keeps up with evolving technology.

“We have to remain relevant to our members, and we have to provide the service at the best level that we possibly can,” he said.

For the complete article see the 01-18-2014 issue.

Click here to purchase an electronic version of the 01-18-2014 paper.

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