Letter to House Budget Committee on Credit Union Tax Exemption

WASHINGTON, D.C. – Today, the Defense Credit Union Council (DCUC) sent a letter to the House Budget Committee, strongly advocating for the preservation of the credit union tax exemption as the committee deliberates on federal budget and reconciliation.
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DCUC continues to emphasize to policymakers the impact credit unions—particularly those serving military families and veterans—have in providing access to affordable financial services, supporting small businesses, and ensuring financial readiness for those who serve our country.

DCUC Chief Advocacy Officer Jason Stverak explained how revoking or altering the tax-exempt status of credit unions would have far-reaching consequences, including increased financial burdens on military families, reduced access to credit for small businesses, and economic harm to underserved communities.

DCUC’s letter supported reasons why the federal tax status of credit unions should remain preserved and supported, as credit unions remain centered in their founding mission as not-for-profit financial cooperatives for the benefit their members.

Stverak outlined key factors that distinctively set credit unions apart from for-profit financial service providers, including: credit unions’ member-driven model by reinvesting in their members with lower loan rates, higher savings yields, and fewer fees; a strong focus on community investment and support, and democratic governance by offering every member an equal vote in leadership decisions which in turn, ensures greater accountability and transparency.

DCUC’s letter also listed the economic advantages credit unions bring through the long-recognized federal tax exemption:

• A 2023 study by the Credit Union National Association (CUNA) found that credit unions delivered $15.5 billion in direct financial benefits to their members through better rates and lower fees compared to banks.
  
• The National Association of Federally-Insured Credit Unions (NAFCU) estimated that eliminating the tax exemption would cost credit union members $208 billion over 10 years due to increased fees and reduced rate advantages.
  
• Credit unions play a crucial role in funding small businesses, especially those owned by veterans and military spouses. Studies show credit unions are 10% more likely to approve small business loans compared to banks.
  
• Credit unions are instrumental in promoting homeownership, particularly for first-time buyers and service members utilizing VA home loans.
  
• Defense credit unions provide essential financial education, emergency assistance programs, and low-interest payday alternative loans to protect military families from predatory lenders.

If credit unions were taxed, DCUC stressed the economic impact would be severe:

• Higher Costs for Families: The average credit union household would pay an additional $150-$200 annually in higher loan rates and fees.
  
• Reduced Credit Availability: A tax on credit unions could shrink small business lending by up to $5 billion annually.
  
• Wider Economic Disruptions: NAFCU estimates that taxing credit unions would slash $142 billion from the U.S. GDP over 10 years, leading to job losses and weaker economic growth.

DCUC voiced how, for nearly a century, we’ve seen bipartisan support and recognition of the distinct structure, purpose, and impact credit unions have within our country’s financial sector; providing financial services that the for-profit sector does not adequately supply—often for working-class Americans, military families, small businesses, and underserved or deserted communities. DCUC strongly believes that preserving the credit union tax exemption is not just sound policy; it is a commitment to financial inclusion and economic stability.

“We cannot stress enough the ripple effect this would have on communities across America, particularly those that are underserved, rural, or vulnerable,” says Stverak. “As budget reconciliation and other discussions unfold, it is critical that our leaders in Washington fully understand the consequences revoking or altering this tax status would bring to Americans' access of essential financial services. We will continue to actively monitor these discussions and seek to equip all committee members and leaders with the information needed to support their decision-making.”

For more information, please contact Jason Stverak at [email protected] and visit dcuc.org/advocacy.