WASHINGTON–More than 50 state bankers association are calling on the Treasury department to conduct a study on the nation’s credit unions to “determine whether its current activities align with its longstanding tax-exempt status.”
The theme of the letter is one that has been familiar in recent years.
In their letter to Treasury, the bankers groups stated the Federal Credit Union Act was enacted 1934 to expand access to financial services for individuals of modest means.
“However, credit unions have become increasingly complex, and their recent activities call into question whether they should still qualify for their tax exemption. Congress last examined their tax treatment almost 20 years ago,” the letter states. “According to the National Credit Union Administration, ‘consistent with long-running trends, credit unions with assets of at least $1 billion reported the strongest growth in loans and membership over the year ending in the first quarter of 2025,’ and there are now more than 450 such credit unions.
“Seemingly at odds with their mission and structure, these credit unions acquire commercial banks, offer nationwide membership, and sponsor professional sports teams,” the letter continues. “They even draw tax-exempt income from business entities for IT, insurance and other services. Their growth suggests that they are operating like banks without the same requirements, including federal corporate income tax obligations.”
‘Significant’ Deviation
The banking organizations told Treasury that in 2024 credit unions acquired 22 banks with total assets of $11.8 billion and also bought the multi-million-dollar naming rights to the Washington Commanders NFL stadium (the rights were bought by Northwest FCU).
“Credit unions have significantly deviated from their congressionally mandated mission to provide credit to those with modest means and have become large enough that they no longer need the same protections under the tax code,” the letter states. “Given how the credit union industry has changed, we believe it is time to evaluate credit unions’ tax-exempt status. For example, federal credit unions are classified as government instrumentalities, which allows them to avoid filing Form 990 like other nonprofit organizations and thus conceal pertinent information about executive compensation and other relevant data.”
A ‘Kind of Opacity’
The letter goes on to states, “It is this kind of opacity that has enabled credit unions to offer complex investment products and even wealth management opportunities for consumers—activities that are far beyond what Congress initially intended when it afforded the federal income tax exemption to credit unions. The IRS’s designation of federal credit unions as government instrumentalities should be examined.”
In addition, the letter urges Treasury to recommendations about whether Congress should introduce legislation that would require all credit unions to pay federal income tax and compel federal credit unions to pay unrelated business income tax (UBIT) like other nonprofits.
“This aligns with President Trump’s efforts to “bring accountability and transparency to federal spending, ensuring taxpayer dollars are spent wisely and effectively,” so this scrutiny would be consistent with White House policy,” the letter continues. “And while Treasury projects that the credit union tax exemption will cost $32.2 billion from Fiscal Year 2025 to 2034, it should also assess the revenue impact of federal and state credit unions on state and local governments.”
The letter is signed by banking organizations in all 50 states plus the District of Columbia.