The #DontTaxMyCreditUnion Movement

If you follow the news closely, you may have heard about the new administration’s “Big, Beautiful Bill.” One part of the bill is focused on tax cuts, which always begs the question: “How are we going to pay for them?”

That’s where the #DontTaxMyCreditUnion movement comes in.

A recent article from the Taxpayers Protection Alliance cites that removing the credit union income tax exemption would generate $30 billion over the next 10 years.

Sounds like a lot, right? Let’s take a closer look at the fine print.

On this Headlines and Fine Print episode, PACU President & CEO Dion Williams tackles this exact topic, setting the record straight on why this tax exemption exists and, more importantly, why it matters.

But let’s back up for a second.

In a previous Headlines and Fine Print episode, Dion explained that while credit unions are exempt from federal corporate income taxes (because we are not-for-profit cooperatives), we still pay all other taxes, such as employee income and property taxes.

As not-for-profit cooperatives, the “profits” earned and money “saved” by credit unions because of the corporate income tax exemption are returned to member-owners in three ways:

1. Members receive more competitive rates on loans and deposits
2. Members benefit from low fees
3. We invest in service delivery channels, products and services that enhance members’ access and experiences.

Now, back to that $30 billion.

That number may grab headlines, but it’s missing the bigger picture. Here’s what credit unions actually give back.

• Estimated economic impact of $297 billion
• $35 billion in consumer benefits
• Support for 1.2 million jobs
• Service to over 140 million credit union members

The economic impact and consumer benefits dwarf the $30 billion in taxes that federal corporate income tax on credit unions would generate. Removing the tax exemption means that everyday people, working-class consumers and small businesses on Main Street will lose the most.

The headline of $30 billion generated from removing the exemption may sound nice, but the fine print says we’re worth a whole lot more. That’s why our tax exemption must be preserved.

Banks argue that only credit unions with more than $1 billion in assets should be taxed.

“We've seen this too many times in Congress and through regulation that when they try to say ‘This only applies to the large institutions’ or ‘This doesn't apply to the small institutions,’” Dion says, “It's a fool's errand.”

Here’s what he means:

• The Durbin Amendment limits interchange fees merchants pay when customers use debit cards. Although there was intended to be a special exemption for smaller institutions, many smaller credit unions and community banks experienced a decline in their interchange income. Additionally, a Federal Reserve Bank of Richmond study found that merchants did not pass on the savings from the capped interchange fees to consumers.
• Last year, the Consumer Financial Protection Bureau proposed a rule limiting late fees on credit cards. The narrative suggested that this rule would only affect larger financial institutions. However, it would have given larger institutions a competitive advantage over their smaller counterparts.

Trying to segregate larger credit unions from smaller ones, whether intended or not, will eventually result in the extinction of small institutions.

“But make no mistake, credit unions are in this together, no matter the size,” Dion says. “We all work hard to make a difference in the communities we serve.”

Don’t want your credit union to be taxed? Check out DontTaxMyCreditUnion.Org, where you can get the facts, contact your elected officials and make your voice heard.

Want to discuss this topic more or suggest a future topic? Email Dion at [email protected]. And don’t forget to check out the Headlines and Fine Print podcast on Spotify and YouTube for more conversations like this one.