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Congress granted credit unions their tax status more than 90 years ago, and year after year it consistently proves itself as one of the U.S. government’s best investments.  

While credit unions pay a long list of taxes, they do not pay the federal income tax on profits. Why? Because instead of paying profits to investors, credit unions are cooperative financial institutions, owned by their members and as a result return earnings back to the members they serve in the form of reduced fees, lower interest rates on loans, higher savings rates, and institutional improvements.

On average, credit unions pay higher yields on certificates of deposits on all term lengths and the annual total of fees collected is far less than large banks. Many branches work with their members to waive fees when appropriate and offer financial literacy programs to give them a hand through life’s hard moments.  

The tax exemption, in turn, allows credit unions to provide safe and affordable financial services to people from all walks of life.  Their place in financial services is critical for those left behind by banks. 

With the Tax Cuts and Jobs Act set to expire next year, that means an inevitable wave of tired misinformation from banks that want to limit competition from credit unions. Because ultimately, banks think they should be the only financial institutions able to grow, even though they choose to abandon communities all across the country. 

Hear me out – credit unions exist as not-for-profit cooperatives to serve working families, small business owners, farmers, and the people who make up Main Street America, not just a select group of stakeholders. For banks, it’s all about profits. For credit unions, it’s all about helping people achieve their best lives. Whether they live in an urban city core, a rural community or anywhere in between, that’s the value credit unions provide to people. 

Credit unions are built differently. They operate differently. At their core, they care about their members and their financial well-being and will work with them to achieve their financial goals. Their tax-exempt status ensures that.  

Credit unions’ diverse membership reflects the communities they serve across the country, and so does their leadership. More than half of credit union CEOs are women while only five percent of publicly traded banks have a woman leading their operation. Additionally, three times as many credit unions are minority depository institutions compared to banks. 

Not only is having a credit union great for local economies, but the tax-exemption pays off. America’s Credit Unions has the data to prove it.  

The credit union tax status conveys $35 billion in financial benefits to members and American consumers. In comparison, the credit union tax status “costs” about $2.5 billion. The financial benefits thus represent a near 1,400% annual return on the government’s investment.  Banks, on the other hand, have received hundreds of billions in bailout dollars and paid nearly just as much in fines for taking advantage of consumers. Let’s not forget the government has saved “too big to fail” banks nearly $1 trillion in total since the 2008 financial crisis. And the federal agents that go after the bad banking actors participating in money laundering or Ponzi schemes are paid by us, the American taxpayer.  

Preserving the credit union tax status should be a no brainer for lawmakers on Capitol Hill.  But this is Washington, D.C., where the banking lobby thinks they can push their narrative of distorted facts, unsupported claims, and conveniently left-out details that show their hypocrisy. The fact remains that the credit union tax status is one of the best public policy investment options out there.  

Let me set the record straight – credit unions will not back down and will do what it takes to protect the more than 140 million Americans who rely on this industry for safe and secure financial services.  

More than 8,600 bank branches closed since 2020 and in 2023 alone banks with $549 billion in assets failed.  In a time when banks are experiencing noteworthy turmoil and consumers are growing wary about financial stability, it’s important to recognize, celebrate, and preserve the credit union difference beyond the member-owned, cooperative structure.  

With the tax conversation gearing up in Washington, D.C., discussions about the credit union tax-exemption status are likely just beginning. Get ready – because credit unions aren’t backing down when it comes to protecting needed access for their members and the communities they serve.  

 



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