Thousands of advocates are convening in Washington, D.C., this week for America’s Credit Unions’ Governmental Affairs Conference (GAC) to share a critical issue that demands the attention of policymakers: the preservation of America’s credit unions and cooperative financial institutions.
These member-owned organizations operate in every congressional district across the United States, serving over 140 million Americans and providing essential financial services that empower individuals, families, and businesses.
However, ongoing discussions about tax policy threaten to undermine the very model that makes credit unions indispensable to communities across the country: cooperatives.
Credit unions are one of the most successful examples of the cooperative business model, embodying the values of mutual support and democratic governance. These institutions are not merely financial service providers; they are the backbone of economic viability and freedom across the United States. Regardless of industry, the cooperative business model is a testament to the strength of people and communities working together.
By pooling resources and prioritizing community growth, credit unions create financial stability for working families, small businesses, and rural communities that would otherwise be overlooked by traditional banking institutions.
Banks vs. credit unions
Banking groups argue 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’ cooperative model produces significant pro-social outcomes that aren’t found anywhere else in the financial sector.
Banks are thriving despite credit unions’ presence in the market: Banks have a near-monopoly presence, with a 91.2% market share of total financial institution assets, compared to credit unions’ 8.8% share. Not to mention, the tax cuts banks received from the 2017 Tax Cuts and Jobs Act costs the government 12 times more than the credit union tax status.
The “Don’t Tax My Credit Union” campaign underscores the essential role that roughly 4,600 credit unions play in the financial ecosystem. Unlike for-profit banks, credit unions operate under a cooperative model, reinvesting earnings into their members through lower fees, better loan rates, and community-focused initiatives.
While banks push for credit unions to pay federal income tax, credit unions already contribute significantly to tax revenue. Credit union contributions accounted for a total of $36.3 billion in taxes in 2023: $23.3 billion in federal taxes and $13 billion in state and local taxes, such as payroll and property. These include both direct tax payments by credit unions and indirect payments made by credit union employees and other entities, such as vendors, impacted by credit unions.
That’s why a new tax on credit unions would not only impose a financial burden on these institutions, but also directly harm the millions of middle-class Americans who rely on them for affordable financial products.
Historically, credit unions have stepped up in times of economic distress, from helping families recover from the Great Recession (when 7.3% of bank mortgages were delinquent against 2% of credit unions, when 331 banks failed against credit unions’ 64, and when 710 banks received more than $236 billion in public assistance, compared to 48 credit unions receiving $69 million) to supporting small businesses through the COVID-19 pandemic. They 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 their clear distinction from commercial banks, credit unions continue to face undue scrutiny and the looming threat of increased taxation.
The proposed tax changes ignore the fundamental purpose of credit unions: They exist solely to serve their members, not to generate profits for shareholders. Subjecting them 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 cooperative business model ultimately works because it prioritizes people. For credit unions, that means “people over profits”—a principle that Congress must recognize and protect.
Legislators have a choice: 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 they serve to thrive.
As discussions unfold at GAC and beyond, cooperatives across the country will call on lawmakers, industry leaders, and community advocates to stand with credit unions.
The time to act is now—protect the financial future of millions by saying no to a new tax on credit unions.
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