WASHINGTON, D.C (January 31, 2025) |
Today, the Defense Credit Union Council (DCUC) requested a meeting with members of the House Ways and Means Committee to discuss the critical importance of maintaining credit unions' federal tax-exempt status.
In a letter sent to every committee member's office, DCUC Chief Advocacy Officer Jason Stverak reaffirms how this exemption is not a special privilege but a recognition of credit unions' not-for-profit, member-owned structure. Credit unions, including those serving military and underserved communities both stateside and overseas, have provided significant economic benefits to these populations for close to a decade.
“Congress has consistently recognized the unique role of credit unions. The Credit Union Membership Access Act (CUMAA) of 1998 reaffirmed their tax-exempt status, and recent bipartisan efforts continue to oppose taxation attempts due to the overwhelming consumer benefits they provide,” says Stverak. “Given the vital role credit unions have in supporting military families and underserved communities, DCUC strongly urges the lawmakers to oppose any efforts to remove or diminish this long-supported regulation. The consequences will undoubtedly bleed over into local economies and communities, impacting the financial choice and support for service members, veterans, and working-class Americans.”
Stverak emphasized how credit unions, unlike large for-profit banks, continue to operate from their not-for-profit structure, focusing on member benefits rather than shareholder profits. This distinction has led Congress to repeatedly reaffirm their tax-exempt status under the Federal Credit Union Act of 1934 and subsequent legislation.
Stverak supported this distinction by outlining key aspects that form credit unions' unique structure as financial cooperatives, including mutual ownership – where earnings are returned to members through lower loan rates, higher savings yields, and reduced fees; restricted membership – federal law limits credit unions' field of membership, ensuring they serve specific communities; and reinvestment in communities – earnings are passed through to improve services and local economic development.
DCUC’s letter to the committee also noted how credit unions serve an important role in supporting the financial readiness of military families, providing affordable financial products, emergency loans, and financial education programs. DCUC shared data confirming the difference credit unions provide to America’s consumers:
- More Affordable Credit – Credit union members saved over $15 billion in 2022 due to lower interest rates (CUNA, 2023).
- Protection from Predatory Lending – Defense credit unions offer safe alternatives to high-interest loans (CFPB, 2023).
- Support for Underserved Communities – Over one-third of credit union branches serve low-income areas (NCUA, 2023).
- Financial Education – Programs help military personnel build credit, budget, and avoid financial pitfalls.
Consequences of Taxation
Stverak stressed how taxing credit unions similar to banks would bring devastating effects, increasing costs for members, reducing financial choices for military families, and weakening economic stability. Our letter ensured the committee was made aware of the consequences, such as increased loan rates and fees, costing consumers an estimated $12 billion annually (CUNA, 2023); forcing smaller military-affiliated credit unions to consolidate or close, limiting access to affordable financial services; and eroding over $225 billion annual contributions credit unions bring to the U.S. economy (NAFCU, 2023) – disproportionately affecting middle-class families and small businesses.
Worth mentioning, DCUC also shared how financial stress is a leading cause of security clearance revocations. Defense credit unions provide emergency financial support crucial to military preparedness (DoD Financial Readiness Report, 2023).
DCUC concluded its letter requesting a meeting with the Committee to further discuss this matter, and provide additional data or firsthand testimony from defense credit union leaders.
For more information, please see DCUC’s official letter and visit dcuc.org/advocacy.