By Tony Hernandez
Protecting the industry’s credit union tax exemption status is at the forefront of the Defense Credit Union Council’s (DCUC) gaze when stepping into the advocacy arena in Washington.
The council has, and still is, leading the overall industry’s efforts in protecting credit union tax exemptions along with opposing new regulatory language similar to that of CRA, specifically in section 204 of Sen. Elizabeth Warren (D-MA) and Rep. Emanuel Cleaver (D-MO)’s Community Reinvestment Act-like (CRA) language proposed in Section 204 of the “American Housing and Economic Mobility Act of 2024.”
DCUC has urged Congress in recent letters to safeguard the credit union industry’s tax exemption by rejecting proposals to impose income taxes on these institutions. With certain provisions of the 2017 Tax Cuts and Jobs Act set to expire, DCUC voiced its position by stating it is unacceptable to equate credit unions—especially those serving military and veteran communities—with large, profit-driven banks like Wells Fargo and Bank of America.
Letter to Senators
In our July 12, 2024, letter addressed to Sens. Jack Reed (D-RI), Chairman, and Roger Wicker (R-MS), Ranking Member, of the Senate Armed Services Committee, DCUC thanked Congress for its recognition of the unique role credit unions play, particularly defense credit unions that provide crucial financial services to our service members and veterans.
As affirmed by the NCUA and a 1979 IRS document, credit unions under IRC 501(c)(14) are distinct entities, fulfilling their original purpose with a common bond among members and a commitment to serving low- and moderate-income individuals.
Through their tax-exempt status, credit unions offer lower interest rates and free checking accounts, benefiting consumers by providing an essential alternative to higher-cost banking options. DCUC shares how this is especially vital for military bases and veteran communities facing financial challenges. Taxing credit unions would diminish this choice and increase costs, impacting the financial readiness of our Nation’s service members, their dependents, and our veterans.
Supporting Morale
DCUC has emphasized how credit unions not only offer competitive rates and valuable services but also play a significant role in supporting military morale and welfare. The tax exemption ensures that savings are directly reinvested into the communities they serve, maintaining their critical role as democratically controlled, not-for-profit institutions dedicated to supporting diverse communities.
The not-for-profit credit union difference fosters a strong sense of community and loyalty among members. Credit unions serving our military and veteran communities, in particular, build trust and reliability, leading to stronger member relationships and higher levels of satisfaction.
The Founding Ethos
Credit unions have a founding ethos of people helping people and being known for their member-centric approach. This means they can offer tailored financial products and services, such as financial education and counseling, which are particularly beneficial for military personnel and veterans facing unique financial situations.
Additionally, credit unions often reinvest their savings into their local communities. For military and veteran members, this means enhanced support for programs and services that benefit their specific needs, such as financial assistance for deployment or support for veteran-owned businesses. As credit unions continue to focus on serving specific communities, including military and veteran populations, they can provide better access to financial services for individuals who might otherwise face barriers in the broader financial system, including more rural communities that were previously served by banks and need safe, reliable financial services.
Overall, tax exemptions help credit unions remain financially sound while focusing on their mission to serve their members’ best interests, particularly those in the military and veteran communities.
Other Issues for Advocacy
In addition to defending this regulation, DCUC has also continued to successfully advocate for the exclusion of harmful amendments to the 2025 National Defense Authorization Act, NDAA, as well as previous year’s attempts to attach versions of the Credit Card Competition Act (CCCA), or CCCA-like language, and unnecessary study proposals to each year’s NDAA fiscal review.
DCUC welcomes collaboration with other trade associations, leagues, and system partners to join its opposition to CRA-like legislation and future threats to the credit union industry’s tax exemption regulatory protections.
There are no good reasons as to why anyone would avoid these issues. In fact, this is why credit unions pay dues each year to industry associations, councils, and leagues. Ignoring or minimizing any of these issues would be derelict in our obligations and duty to our member credit unions and bleed into their ability to best serve their members financial needs.”
You can read more about DCUC’s position on this issue featured on CUToday.com and by visiting dcuc.org/advocacy.
Tony Hernandez is president and CEO of the Defense Credit Union Council