As Congress deliberates tax reform in the coming weeks, the federal income tax exemption that enables credit unions to serve their members effectively is under scrutiny. Credit unions are not-for-profit cooperatives owned by their members. This exemption allows us to reinvest our earnings into member services, offering better rates, lower fees, better services, and community support.
This cooperative model has enabled credit unions to offer financial education, support local initiatives, and provide personalized services that big banks often cannot match. Eliminating it could lead to increased costs for members and reduced access to affordable financial services.
Banks vs. Credit Unions: How We’re Different
Banking lobby groups are arguing that credit unions are just like banks, and the not-for-profit tax status is an unfair advantage. Yes, credit unions offer financial services, but the reality is that credit unions are less than 9% of the financial market share and our cooperative model produces significant pro-social outcomes that aren’t found anywhere else in the financial sector.
Historically, credit unions have stepped up in times of economic distress, from helping families recover from the Great Recession when banks wouldn’t or couldn’t, to supporting small businesses through the COVID-19 pandemic. We serve as lifelines in underserved areas where traditional banks have retreated, ensuring that financial inclusion remains a reality, rather than a policy objective.
Yet, despite our clear distinction from commercial banks, the proposed tax changes ignore the fundamental purpose of credit unions: We exist solely to serve our members, not to generate profits for shareholders. Subjecting credit unions to the same tax structure as for-profit banks would disrupt a system that has successfully provided financial access and stability for over a century.
Tax-exempt status
The credit union cooperative model prioritizes “people over profits”—a principle that Congress must recognize and protect. Legislators can support policies that strengthen financial inclusion or impose unnecessary tax burdens that will hurt millions of Americans if credit unions are forced to cut back on essential services.
We urge policymakers to listen to their constituents, those across the country who depend on credit unions, and to uphold the tax-exempt status that allows these institutions and the communities we serve to thrive.
Take Action Now
Your voice is crucial in preserving the benefits that credit unions provide. By reaching out to your elected officials, you can help ensure that credit unions remain a viable option for affordable and community-focused financial services. Tell them what’s at stake:
- Higher Costs for Members: Without the tax exemption, credit unions may have to pass on additional costs to members, resulting in higher loan rates and fees.
- Reduced Access to Services: Credit unions often serve communities underserved by traditional banks. Taxing them could limit their ability to provide essential financial services to these areas.
- Economic Impact: A study indicates that removing the credit union tax exemption could reduce GDP by $266 billion and result in 822,000 job losses over the next decade.
How You Can Help:
- Visit DontTaxMyCreditUnion.org: This site provides resources and information on the importance of the credit union tax exemption.
- Contact Your Representatives: Use the tools available on the site to send a message to your U.S. Representative and Senators, urging them to oppose any efforts to tax credit unions.
- Share the Message: Inform friends, family, and community members about the potential impact of taxing credit unions and encourage them to take action as well.
By acting now, you can help protect the services and benefits that credit unions offer to millions of Americans. Together, we can ensure that credit unions continue to thrive and serve our communities effectively.
