WASHINGTON—As Congress intensifies discussions around budget reconciliation and the expiring provisions of the 2017 tax law, more than a dozen credit union organizations—representing over 4,500 institutions and 140 million member-owners—have issued a unified call to lawmakers: preserve credit unions' historic tax status.
A coalition of credit union advocates sent a joint letter to Congress highlighting the vital, community-centered role credit unions play in improving and supporting Americans’ financial lives, the groups noted.
Signing the letter: the Defense Credit Union Council (DCUC), America’s Credit Unions (ACU), Credit Union Executive Society (CUES), National Association of Credit Union Chairs (NACUC), National Credit Union Management Association (NCUMA), Inclusiv, TruStage, Earnest Consulting Group (ECG), Callahan and Associates, National Council of Firefighter Credit Unions (NCOFCU), Metropolitan Area Credit Union Management Association (MACUMA), Association of Credit Union Audit and Risk Professionals (ACUARP), and the National Council of Postal Credit Unions (NCPCU).
“Altering or revoking this decades-long federal tax status of credit unions—a benefit granted in recognition of their not-for-profit, member-owned structure and purpose—would work counterproductively to budget reconciliation and the financial prosperity of the American people,” the groups said.
The groups noted credit unions have been “sounding the alarm” as lobbying by large bank trade associations intensifies.
At a Senate Finance Committee hearing last fall, several lawmakers signaled openness to revisiting the credit union exemption as part of broader tax reform. This ignited a grassroots response from the credit union community nationwide, including a total movement campaign, “Don’t Tax My Credit Union,” the groups stated.
The groups stated, “The vast majority of a bank’s profits flow to a relatively small group of investors. Studies show banks devote only around 1% of their profits to community reinvestment, with the other 99% going to shareholders and executive compensation. Credit unions invert that model – by charter, we reinvest essentially everything into serving our members.”
Subchapter S
The response also calls attention to banks’ own benefit of significant federal tax breaks—most notably the 2017 corporate tax cut and the Subchapter S loophole to avoid corporate taxes entirely.
“The banking industry holds over $24 trillion in assets (nearly ten times the assets of all credit unions combined) and earned record profits in recent years. Banks also benefit from numerous tax breaks and subsidies that are not available to credit unions…For example, over 2,000 banks – including some large ones – use a special Subchapter S tax election to avoid corporate income taxes entirely, saving those banks an estimated $1.8 billion in taxes in 2022 alone,” the groups stated.
The coalition’s letter noted how the 2017 Tax Cuts and Jobs Act provided banks with a massive windfall by slashing corporate tax rates:
“[B]anks collectively enjoyed a $28.8 billion annual tax cut in 2017, amounting to an estimated $447 billion in tax breaks over 10 years. In fact, the federal revenue “cost” of the entire credit union tax exemption is tiny by comparison – bank tax cuts and loopholes have a budgetary impact roughly 16 times greater than the credit union tax exemption. It is galling that some in the banking industry, after receiving huge tax cuts and even taxpayer-funded bailouts in the past, are now lobbying to raise taxes on credit unions.”
The letter also detailed what is at stake, including higher costs for members.
Finally, the coalition pointed out the federal government forgoes roughly $4 billion annually by not taxing credit unions. Yet industry data shows credit unions and their members still contribute more than $36 billion in other taxes (payroll, property, state/local) each year—all while returning that $4 billion in tax savings back to members in the form of better financial pricing, services, and support.