As Not-for-Profit Cooperatives, Credit Unions Leverage Corporate Tax Exemption for Member Benefit

Tax reform is on the table. As legislators at the state and federal levels grapple with budget deficits the bank lobby has seized the moment to call for a heavier tax burden on credit unions and their 93 million members.

The bank lobby introduced a bill in Oregon and also presented their case to lawmakers in up to twenty other states. And, the debate is “on” in Congress where the House Ways and Means Committee Working Group is preparing to issue a report on tax exemptions to its full committee by May 6th.

Representatives of the Credit Union National Association (CUNA) have already weighed in, educating the working group about the reason behind the tax exemption.

“Every board member, every employee, and all of our members should understand how committed the industry is to ensuring the charter and structure delivers real tangible value to the members and communities served by credit unions,” said Troy Stang, President and CEO of the Northwest Credit Union Association (NWCUA). “The reason for the tax exemption boils down to one issue: structure. As not-for-profit cooperatives, that structure means there are no profits returned to stockholders, but rather benefits returned to members in the form of lower fees and better interest rates. These are returns the for-profit banks can’t give to their customers.”

Data support for the credit union structure message is strong:

  • Structured as not-for-profit cooperatives, credit unions return earnings to members. The real, tangible benefits resulting from the structure puts money back into the pockets of consumers.
    • For example, an analysis of rates and fees complied by the independent financial tracking firm Datatrac finds that nationally, credit union members saved a collective $5.8 billion in the twelve months ending in December, 2012—an average of $62 per member and $118 per member household.
    • The Datatrac data finds Oregon members saved $110 million during the same period—an average of $80 per member and $152 per household.
    • Washington credit union members saved $168 million—putting $58 back into the average member’s wallet and saving $111 per household.
    • Because of lower loan rates, financing a $25,000 car for 60 months through a credit union saves members over $200 per year.
    • Credit unions do pay millions in payroll and property taxes but receive the corporate tax exemption because of their not-for-profit, cooperative structure.
    • The benefits that credit unions’ not-for-profit, cooperative structure provides for members—$5.8 billion last year—far outweigh the $500 million the Congressional Joint Committee on Taxation estimates a corporate tax on credit unions could generate.
    • A Voter/Consumer Research poll of Northwest voters conducted in January, 2013 showed 68 percent of Washington voters and 70 percent of Oregon voters support the credit union tax exemption.

Congress is also looking at a list of hundreds of other tax exemptions including the mortgage interest deduction. It is unclear whether Subchapter S banks are under scrutiny. Currently, 2,200 banks—71 of which have assets of $1 billion or more—have cost the government an estimated $9.2 billion in lost revenue since 1997, according to recent CUNA analysis.

“Credit union members may have heard bank lobby claims that credit unions should be taxed like banks because some of them are now “too big” or “indistinguishable from banks,” said Stang. “And here is where credit unions certainly do distinguish themselves from banks: they pay their members, not stockholders. They did not engage in the risky, irresponsible big-bank behavior that nearly brought our economy to its knees in 2008 and required taxpayer bailouts.”

Even after the 2013 state legislative sessions gavel to a close, the NWCUA encourages credit union leadership and members to share the credit union message in their communities and with legislators. The Association will work directly with credit unions in the next several weeks to provide some new, data-rich resources to share with members and legislators.


Questions? Contact Lynn Heider: 503.350.2225,

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