WASHINGTON—Fifty-two state bankers associations Tuesday urged the Treasury Department to launch a study of the $2.37 trillion credit union system to assess whether its current operations remain consistent with its longstanding tax-exempt status.
And the request was made to Assistant Treasury Secretary Ken Kies. Credit unions have expressed concerns about Kies’ role in Treasury, due to his past record on credit union taxation. Just over ten years ago Kies co-authored a seven-page report for Deloitte that advocated the repeal of the federal tax-exempt status for credit unions of all sizes.
“The undersigned state bankers associations write to encourage the Treasury Department to publish a study on the $2.37-trillion credit union system to determine whether its current activities align with its longstanding tax-exempt status,” the state bankers associations’ letter states. “Congress enacted the Federal Credit Union Act in 1934 to expand access to financial services for individuals of modest means. However, credit unions have become increasingly complex, and their recent activities call into question whether they should still qualify for their tax exemption. Congress last examined their tax treatment almost 20 years ago.
“According to the National Credit Union Administration, ‘consistent with long-running trends, credit unions with assets of at least $1 billion reported the strongest growth in loans and membership over the year ending in the first quarter of 2025,’ and there are now more than 450 such credit unions,” the letter continues. “Seemingly at odds with their mission and structure, these credit unions acquire commercial banks, offer nationwide membership, and sponsor professional sports teams. They even draw tax-exempt income from business entities for IT, insurance and other services. Their growth suggests that they are operating like banks without the same requirements, including federal corporate income tax obligations.”
The letter notes that in 2024, credit unions announced a record 22 bank acquisitions targeting about $11.8 billion in bank assets.
“One federal credit union even bought the multi-million-dollar naming rights to the Washington Commanders NFL stadium. Credit unions have significantly deviated from their congressionally mandated mission to provide credit to those with modest means and have become large enough that they no longer need the same protections under the tax code.
“Given how the credit union industry has changed, we believe it is time to evaluate credit unions' tax-exempt status,” the letter concludes.
DCUC Reacts
“It is disappointing that banks are once again distorting the facts to push for what amounts to a tax hike on 142 million working Americans,” said Jason Stverak, chief advocacy officer of the Defense Credit Union Council. “Credit unions have earned their tax exemption by delivering on our not-for-profit mission – we return direct financial benefits to our members and communities every day. We urge Mr. Kies and the entire Administration to stand with credit unions and our 142 million member-owners, rather than lending credence to the banks’ misleading attacks."
Stverak asserted bank lobbyists often claim credit unions have an “unfair” advantage because they don’t pay federal income tax.
"What they don’t mention is the array of tax breaks banks themselves enjoy – tax breaks that actually cost the Treasury far more than the credit union exemption," he said.
Stverak pointed out the following "facts":
- Subchapter S Loophole: "Over 2,000 banks – including some large ones – elect Subchapter S status to pay no corporate income tax at all, a maneuver that saved those banks an estimated $1.8 billion in taxes in 2022 alone . In other words, many banks themselves avoid corporate taxes, yet they attack credit unions for being exempt."
- 2017 Tax Windfall for Banks: "The 2017 Tax Cuts and Jobs Act slashed the corporate tax rate, delivering banks a $28.8 billion annual tax cut (about $447 billion over 10 years). Thanks to such cuts and loopholes, bank tax breaks have a budget impact roughly 16× greater than the entire credit union tax exemption . It is galling that banks – after reaping giant tax windfalls and even taxpayer-funded bailouts – are now lobbying to raise taxes on credit unions."
- Modest Cost, Huge Benefit: "By contrast, the federal government forgoes about $3–$4 billion per year in revenue by not taxing credit unions. Moreover, credit unions and their members do pay taxes – over $36 billion annually in state, local, payroll, and other taxes – all while reinvesting earnings into better rates and lower fees for their member-owners. In short, credit unions still contribute their fair share, and the value created by their tax status flows directly to everyday Americans, not corporate shareholders."
The bankers’ narrative also ignores that credit unions remain a fraction of the financial industry. Banks today hold over 91% of U.S. financial assets, a market dominance they’ve maintained since credit unions were founded . Even community banks have outperformed credit unions on key metrics like return on assets in most recent years , undermining the notion that credit unions are stifling bank profitability. “Credit unions are simply not the competitive threat banks portray – but they are a threat to predatory practices, which is why banks would love to see us taxed or curtailed,” Stverak said.