WASHINGTON-What will the first full week of May in 2025 hold for the nation’s credit union community? No one knows, of course, but many are no doubt hoping for a respite from the drama of last week. And it wasn’t just a bleak picture for credit unions, with one person suggesting traditional financial services providers could be headed toward “extinction.”
Nevertheless, it could be an even busier and more cataclysmic week this week should elimination of the federal credit union tax exemption be included in the budget bill working its way through Congress. The word “existential” if often overused, but it’s difficult to think of a more existential threat to what makes credit unions unique cooperative organizations than would be eliminating a core differentiation that has been in place since enactment of the Federal Credit Union Act in 1934.
The Week That Was & Many Wish Was Not
Just how head-spinning for credit unions was the week of April 28-May 2, 2025? Consider that all this happened:
Harper’s Message Not Always Positive
Former NCUA Chairman and Board Member Todd Harper, who was fired along with fellow Democratic Board Member Tanya Otsuka by the Trump Administration, appeared at several public events where he was critical of not just the firing, but also of what has been taking place more broadly in credit unions themselves, suggesting many have forgotten their mission.
Among other statements, Harper:
- Said both he and Otsuka should be restored to the board in time for a scheduled May 22 board meeting due to the gravity of one of the issues on the agenda, which is the DOGE-led effort to reduce staff by 20%. “After all, if you have fewer examiners and fewer people, there are going to fewer be exams, there is going to be greater risk and we should have a higher NOL (for the NCUSIF).”
- Was critical of the decision by now Chairman Kyle Hauptman to rollback disclosures of what credit unions of more than $1 billion in assets earn in overdraft and NSF income.
- Said he believes “Credit unions are in the most perilous place they’ve been on the taxation issue in the 25 years…I’ve worked on credit union policy issues.”
- Said he believes America’s Credit Unions is “getting what they want” under a Republican-led agency that is rolling back regulations. (That led to a response from America’s Credit Unions.)
- Said critics of CU sports stadium sponsorships and other such deals have a point, suggesting the expenditures should go to members in the form of higher deposit rates and lower loan rates.
- Asked of mergers, “How big of economies of scale do you really need?”
The full story can be found here.
Groups Join in Letter
Threats to the credit union tax exemption in Congress have been an annual occurrence for decades, but just how much more seriously losing that exemption is being taken in 2025 could be seen in a movement-wide effort not seen since credit unions pushed the Credit Union Membership Access Act through Congress more than 25 years ago, including a joint letter sent to the Hill by multiple trade groups.
The full story can be found here.
Credit Unions Lose in the Other Washington
OYMPIA, Wash.–In Washington State, credit unions lost a legislative battle and now a bill that would place a tax on credit union acquisitions of banks awaits the governor’s signature.
The legislation removes the business and occupation (B&O) tax exemption that state-chartered credit unions currently have in place when acquiring community banks. The tax would be 1.2% of the credit union’s gross income, with supporters of the legislation saying it closes a “tax loophole by making credit unions that acquire banks subject to the same B&O tax as banks.”
The Community Bankers of Washington had strongly supported the legislation, noting that in 2024 25% of all credit union acquisitions of community banks in the country happened in Washington State, “driven, in part, by credit unions’ nonprofit and tax-exempt status.”
The GoWest Credit Union Association responded by saying Washington State’s bankers have no reason to celebrate a bill that taxes credit unions that purchase banks in the state.
That story can be found here.
Harper, Otsuka File Suit Against Administration
WASHINGTON–A lawsuit was filed against the Trump Administration challenging the firings of NCUA board members Todd Harper and Tanya Otsuka.
The complaint, filed by Vincent Levy of Holwell Shuster & Goldberg LLP, New York, in the United States District Court for the District of Columbia, offers additional details around the firings and alleges that neither plaintiff was provided any reasons for the termination nor did the one-sentence emails informing them of the dismissal “attempt to assert a basis for cause. Nor could they.”
The lawsuit alleges instability at the nation’s federal CU regulator with a single-person “board.”
The full story can be found here.
Tax Foundation Says CU Acquisitions of Banks Hurts States
WASHINGTON–The Tax Foundation published a new op-ed critical of credit union acquisitions of banks.
Authored by Manish Bhatt, senior policy analyst with the Foundation’s Center for State Tax Policy, the op-ed states that when a tax-exempt credit union acquires a bank, “state or local governments can lose much of the tax revenue that the bank was paying. A tax preference originally designed to level the playing field now has the opposite effect, creating preferences for one class of financial institutions even though the distinctions between credit unions and banks are increasingly blurred.”
The full piece can be found here.
President’s Son Suggests FI on Way to Extinction
DUBAI, United Arab Emirates —President Trump’s son, Eric Trump, is warning banks that if they do not change the way they operate they will become extinct.
“The modern financial system is broken; it’s slow, it’s expensive,” Trump, who is executive vice president of the Trump Organization, told CNBC during a discussion of the United Arab Emirates’ development as a cryptocurrency hub. “There’s nothing that can be done on blockchain that can’t be done better than the way that the current financial institutions are working.”
Trump suggested traditional financial institutions could be headed for “extinction.”
The full story is here.
Critic of CU Tax Exemption Advances Toward Treasury Post
WASHINGTON–The Senate Finance Committee voted to advance the nomination of Kenneth Kies, who has been a critic of credit unions in the past, to be the assistant secretary of the Treasury for tax policy.
Kies has previously expressed opposition to the credit union tax exemption.
That story is here.
Is it Stay Out or Get Out?
WASHINGTON–America’s Credit Unions, along with all credit unions, is now waiting to see if the strategy will be stay out or get out?
America’s Credit Unions has been deploying what its president and CEO, Jim Nussle, has called a “stay out strategy,” that is, lobbying on the Hill and in home districts and states to “stay out” of the any bill that might revoke the tax exemption.
But if the exemption is targeted, the strategy will switch to “get out,” said Nussle.
That story is here.
How Many NCUA Staff are Leaving, & What Are They Taking With Them? Here are 3 Viewpoints
ALEXANDRIA, Va.–NCUA may have already reached its target of reducing staff by 20% as the Trump administration pressures regulatory agencies to reduce headcount, although the agency has not confirmed what several people said they are hearing.
Thos same individuals have also expressed their concerns that a lot of “institutional memory” may be headed out the door.
That story can be found here.
CDFI Funding is Cut
WASHINGTON—President Trump’s FY 2026 budget proposal calls for cutting $163 billion in spending, including all funding for the Community Development Financial Institutions (CDFI) fund.
The details are here.