WASHINGTON, D.C (April 30, 2025) |
“Taxing credit unions would be a regressive move that hits working families hardest. It’s not fiscal responsibility—it’s fiscal harm.”
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 the historic tax status for America’s not-for-profit financial institutions, credit unions.
A coalition of credit union advocates, including 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), sent a joint letter to Congress highlighting the vital, community-centered role credit unions play in improving and supporting Americans’ financial lives.
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.
A Mission Under Threat
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.”
While these advocates are supportive of expanding financial access and strengthening America’s financial ecosystem, the movement has been forced to share a full-throated response to banks’ attacks on the tax status of credit unions, their true-to-this-day historic model, mission, and impact.
“[T]he 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.”
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 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.”
What’s at Stake
The potential consequences of removing the tax exemption are stark:
- Higher costs for members: Credit unions would be forced to raise fees and loan rates, reducing financial access for middle- and lower-income families.
- Reduced service to underserved areas: Smaller credit unions and those serving rural or low-income populations may be forced to cut services or shut down completely, and undercut any efforts for new or De Novo credit unions looking to serve areas in need.
- Market consolidation: A weakened credit union sector could lead to less competition and higher prices for all consumers, even bank customers.
A Modest Cost Brings Massive Return:
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.
“We are working hard to ensure policymakers understand what is at stake. Credit unions’ tax exemption is not about protecting a financial institution – it’s about protecting the financial well being of Americans who rely on credit unions,” the letter read. “It enables us to offer affordable loans to a family buying their first home, to provide counseling to the senior on a fixed income, to approve a micro-loan for a startup business, and to maintain branches in communities that others have abandoned. If that ability is threatened, it is everyday people and local economies that will pay the price.”
For more information, please contact Anthony Hernandez at ahernandez@dcuc.org and visit dcuc.org/advocacy.