Taxpayers Union: End Credit Union Tax Exemption
Conservative group calls for end to exemption
Yet another conservative think tank is arguing that credit unions may no longer deserve their income tax exemption.
“Many credit unions across the country have shifted away from the original intent of their creation and now rival major financial institutions,” the National Taxpayers Union said, in a blog post on the group’s website last week. “As Congress explores options to extend the Tax Cuts and Jobs Act of 2017 and otherwise create a tax code with lower rates and a broader base, it should closely examine the tax status of large credit unions among many other policy options.”
NTU describes itself as the “Voice of America’s Taxpayers.” It pushes for permanent limits on taxes and spending. The NTU is the second conservative think tank that recently recommended that Congress take a close look at the credit union tax exemption.
The Tax Foundation said in a report last month that credit unions no longer deserve the tax advantage. The NTU blog had many of the same arguments as the foundation and cited many of the same statistics in its post. Both reports mirror the positions of banking trade groups, such as the American Bankers Association and the Independent Community Bankers of America.
The NTU said that credit unions have purchased a record number of banks in recent years, including 16 in 2022 and several purchases already announced this year. “The credit unions of today so closely resemble other, taxed financial institutions that their tax-exempt status seems a product of a bygone era,” the NTU said.
The group argues that when credit unions purchase banks, they are removing a tax-paying business from certain tax rolls. The group cites a 2022 report from the congressional Joint Committee on Taxation that showed the tax exemption will reduce federal revenue by $14.4 billion between 2022 and 2026.
The NTU blog post said that looser field of membership standards have allowed credit unions to grow significantly larger than originally envisioned, but it is unclear whether that has resulted in the financial institutions serving more underserved individuals. The group charged that despite the lack of evidence, more and more credit unions are qualifying as “low-income” financial institutions.
On the other side of the issue, a National Credit Union Administration memo, obtained recently by Washington Credit Union Daily, puts bank purchases by credit unions in a broader context. The memo, prepared by Kelly Lay, the NCUA’s director of the Office of Examination and Insurance, said that between 2011 and September 30, 2023, there had been 64 purchases of banks by credit unions. By comparison, in the first nine months of 2023, there had been 90 bank-to-bank purchases and 108 credit union-to-credit union mergers.
Credit union trade groups also have argued that no bank is forced to sell to a credit union; it chooses to do so. In addition, they have said that credit unions bring far more benefits to the communities they serve even though they may be tax-exempt institutions.