WASHINGTON—Escalating its ongoing campaign against credit union acquisitions of banks, the Independent Community Bankers of America is again urging Congress to revoke the federal tax exemption for larger credit unions, citing a recent string of deals—including three transactions reported in the past two weeks—as evidence of what it calls a growing threat to community banks.
ICBA President and CEO Rebeca Romero Rainey said the latest announced acquisition of a tax-paying community bank by a tax-exempt credit union marks the third whole-bank deal in two weeks, following two branch transactions.
“With tax-exempt credit unions resuming their rapid pace of community bank acquisitions this year, ICBA and the nation’s community bankers continue our call for policymakers to address the favorable credit union tax treatment that is driving these harmful deals,” Romero Rainey said.
She pointed to what ICBA described as a recent data analysis showing community banks outperforming credit unions in high-poverty areas and urged Congress to eliminate the federal tax exemption for credit unions over $1 billion in assets.
The comments come as CUToday recently reported on three transactions: ABNB Federal Credit Union’s agreement to purchase two First Bank of Virginia branch offices; Family Savings Credit Union’s branch acquisition deal in Alabama; and Alabama ONE Credit Union’s planned purchase and assumption of Peoples Independent Bank, a whole-bank acquisition expected to close later this year.
America's Credit Unions pushed back on ICBA’s characterization.
“The Independent Community Bankers of America is once again telling lies and twisting data to attack credit unions and get the government to stifle competition. As we’ve repeatedly pointed out, their ‘analysis’ is intentionally flawed," stated ACU President and CEO Scott Simpson. “Credit unions’ tax status reflects their not-for-profit, cooperative structure where members are the owners. They use it to provide lower-cost loans, higher savings rates, and financial counseling services for working people trying to make ends meet. Claims that credit union acquisitions of banks hurt communities are false. The credit union difference and positive impact on people’s lives is clear.”
The Defense Credit Union Council called ICBA's comments "nothing more than a coordinated attempt to weaken the not-for-profit, member-owned credit union model and eliminate a federal tax recognition that has existed for nearly a century."
"Credit unions are financial cooperatives. We do not answer to Wall Street. We do not distribute profits to outside shareholders. Every dollar earned is returned directly to members — including servicemembers, veterans, and their families — in the form of lower loan rates, higher savings yields, and fewer fees. That is the fundamental distinction ICBA continues to ignore," stated DCUC Chief Advocacy Officer Jason Stverak. "The banking lobby’s argument over acquisitions is a distraction. When a credit union acquires a failing or selling bank, it preserves jobs, protects customers, and maintains local access to capital. Communities benefit. Consumers benefit. Competition benefits.
"What ICBA refuses to acknowledge is that banks themselves routinely take advantage of substantial federal tax preferences — including widespread use of Subchapter S elections, which allow qualifying banks to avoid corporate income taxes entirely and instead pass earnings through to shareholders. Thousands of community banks operate under Subchapter S status and receive favorable tax treatment while still distributing profits to private owners," continued Stverak. "It is hypocritical for banking trade groups to attack credit unions’ tax status while defending and utilizing Subchapter S structures that provide significant tax relief to shareholder-owned institutions."
Stverak added that credit unions exist solely to serve their members.
"Banks exist to generate returns for investors. Congress has long recognized that distinction — and the tax treatment reflects it," he said. "If ICBA truly believed in free market competition, they would compete on service, rates, and value, not through political attacks aimed at dismantling a cooperative model that millions of Americans prefer."
Lawmakers should reject these misleading narratives and reaffirm the critical role credit unions play in strengthening communities, supporting military families, and ensuring Americans have access to safe, affordable financial services.