Credit unions were established in the 1930s for the purpose of providing credit to people of modest means. In order to support that mission, credit unions were granted federal income tax-exempt status. Unfortunately, the credit union industry today is no longer serving that purpose, a fact supported by several Government Accountability Office studies, which have found that traditional banks, not credit unions, are the financial institutions serving the greater proportion of low- and moderate-income households — people of modest means. As many credit unions continue to move from their original purpose, they have repeatedly sought approval from Congress to expand their powers, lower their regulatory requirements and increase their unfair competition with banks.

The Issue

Today, the credit union industry is a behemoth with total assets that exceed $1 trillion. At the end of 2017, there were 287 federally-insured credit unions with assets of at least $1 billion. The Joint Committee on Taxation estimates that the tax expenditure for credit unions will cost $2.9 billion in lost income tax revenue in 2018. The committee projects that number will rise to $3.2 billion by 2020. This tax exemption also disproportionately benefits a handful of the largest credit unions. Nearly 75 percent of the tax exemption for credit unions is held by the largest five percent that have assets of $1 billion or more.

Take Action

At a time when our nation continues to run massive deficits, Congress should consider whether or not a justifiable reason exists to continue to give this $1 trillion industry a complete exemption from federal taxation.

Additionally, Congress should reject H.R. 389 and S. 836 which would expand credit unions’ business lending authority by exempting non-owner occupied residential 1-4 properties from the definition of business loans for purposes of determining a credit union’s business loan cap under existing law.