DCUC Applauds Bipartisan Effort to Strengthen CDFI Fund in NDAA

WASHINGTON, DC – The Defense Credit Union Council (DCUC) commends a bipartisan group of U.S. Senators for introducing an amendment to the National Defense Authorization Act (NDAA) that would expand and strengthen the Community Development Financial Institutions (CDFI) Fund. See DCUC's recent letter here.

According to recent news, the amendment, led by Sens. Mark Warner (D-VA), Steve Daines (R-MT), Mike Rounds (R-SD), and Tina Smith (D-MN), would extend the CDFI Bond Guarantee Program for four years, lower the bond threshold from $100 million to $25 million to expand access, and permanently authorize the Native CDFI lending program. It would also require the Treasury Secretary to testify annually on CDFI Fund operations, ensuring accountability and transparency.

“DCUC strongly supports this bipartisan effort to reinforce the CDFI Fund,” said Anthony Hernandez, DCUC President/CEO. “Credit unions are often the only financial lifeline in underserved communities, including military bases, rural towns, and inner-city neighborhoods. Strengthening the CDFI Fund ensures that these institutions can continue to serve families, small businesses, and servicemembers who are too often overlooked by larger banks.”

Today, over 2,500 credit unions carry a federal low-income designation, serving 73 million members of modest means. More than 500 credit unions are certified CDFIs, reaching nearly 20 million Americans in distressed communities.

Despite this, credit unions are once again being pulled into the crosshairs of revived narratives that attempt to re-challenge the credit union federal tax status, this time claiming credit unions are “double dipping” in tax exemptions in terms of CDFI—despite decades of law and data proving otherwise.

DCUC addressed a recent op-ed that mischaracterized credit unions as “tax grifters” and questioned their eligibility for CDFI support, providing a response when the article broke last Friday:

“This is a fundamental misunderstanding of both the law and the purpose of the CDFI program,” Jason Stverak, DCUC’s Chief Advocacy Officer shared. “Credit unions are independent, member-owned cooperatives—not government agencies. They have long been recognized by Congress and Treasury as eligible CDFIs precisely because they are best positioned to serve low-income and underserved populations.”

DCUC reminded that banks benefit from enormous tax breaks of their own, far exceeding those enjoyed by credit unions.

· Over 2,000 banks—more than one-third of all U.S. banks—organize as Subchapter S corporations to avoid corporate income tax at the entity level, saving an estimated $1.8 billion in 2022 alone.
· The 2017 corporate tax cut reduced banks’ tax rates from 35% to 21%, delivering a $28.8 billion annual windfall.
· Altogether, large for-profit banks reap well over $20 billion per year in tax breaks, compared to the roughly $3 billion annual tax expenditure for all credit unions combined.

Meanwhile, credit unions hold just one-tenth the assets of the banking sector—about $2 trillion vs. $24 trillion. Unlike profit-driven banks, which distribute earnings to wealthy shareholders, credit unions return their earnings to members through better rates, lower fees, and essential community services.

The consequences of undermining credit unions’ tax status or cutting them off from CDFI support would be severe:
· Consumers would lose over $10 billion annually in direct financial benefits from better pricing on financial products.
· Many smaller credit unions, particularly those in rural areas or on military bases, would be forced to merge or close—creating “financial deserts” where communities currently rely on them.
· Programs such as free financial counseling, first-time homebuyer workshops, and small-dollar emergency loans would be scaled back or eliminated.
· Big banks would face less pressure to keep rates low and fees fair, raising costs for all consumers.
· New tax burdens could force layoffs or branch closures, costing the U.S. economy an estimated 822,000 jobs and reducing GDP by $266 billion over the next decade.

“Congress should not be swayed by false narratives,” said Stverak. “The truth is clear: credit unions deliver enormous value to their members and communities, and bipartisan support for the CDFI Fund proves just how vital they are to the nation’s financial health and security.”