There’s a growing misconception that credit unions operate just like banks and should be taxed the same way. This misguided belief ignores the fundamental differences between credit unions and banks—both in structure and purpose—and disregards the immense economic value credit unions generate for their members and communities.
For more than 90 years, credit unions have provided affordable, community-focused financial services, prioritizing members over profits. Unlike banks, which are owned by shareholders and driven by profit motives, credit unions are member-owned, democratically operated, and not-for-profit financial institutions. This key distinction is why credit unions rightfully hold tax-exempt status—a status that directly benefits working families, small businesses, and local economies.
The structure of credit unions justifies their tax exemption
Banks are owned by shareholders who elect their board of directors and receive the bank’s profits as dividends. In contrast, credit unions are owned by their members, governed by member-elected boards, and return profits directly to members—not shareholders—through higher savings rates, lower fees, and better loan rates.
Credit unions remain tax-exempt because they reinvest earnings into their members and communities, rather than generating profits for private shareholders. This structure, unchanged since the Federal Credit Union Act of 1934, ensures they operate in service of their members, not outside investors.
For-profit competitors want to see this policy change, but the truth is clear: credit unions continue to uphold the key principles that warranted their tax exemption in the first place. While credit unions adapt to evolving economic conditions, their core mission remains steadfast—serving their members and strengthening local communities.
Credit unions provide a competitive alternative for consumers
Credit unions provide critical financial relief to consumers. In 2023, banks charged an average $5.32 monthly maintenance fee on checking accounts, while credit unions charged just $1.72. Credit union savings accounts earned 0.19% in interest on average in 2023, compared to just 0.07% at banks. Even small differences in rates can significantly impact consumers' long-term savings, reinforcing the value credit unions provide to their members.
Without credit unions offering competitive rates and leveling the financial playing field, many individuals—especially those with low and moderate incomes—would be forced to meet the high-cost terms of large, for-profit banks.
Credit unions already pay billions in taxes
Critics often overlook that credit unions already contribute billions in taxes. In 2023 alone, credit unions paid $36.3 billion in total taxes—$23.3 billion in federal taxes and $13 billion in state and local taxes. New Jersey credit unions alone paid $185 million, and Pennsylvania’s credit unions paid $914 million.
Meanwhile, banks benefited from $28.8 billion in tax cuts from the 2017 Tax Cuts and Jobs Act, with total bank tax breaks projected to cost the U.S. Treasury $447 billion over a decade. Despite banks often arguing that credit unions should be taxed, the reality is that the budgetary impact of bank tax breaks is 16 times greater than the credit union federal tax status.
CrossState's unwavering commitment to tax exemption for all credit unions
Recent legislative developments have sparked discussions about imposing taxes on credit unions with assets of $1 billion or more. CrossState remains firm: credit unions, regardless of size, should not be taxed. Any attempt to weaken this exemption threatens not just individual credit unions, but the millions of members who rely on them for affordable financial services.
Taxing larger credit unions would have severe economic consequences. Many would struggle to compete, leaving members—particularly those of modest means—without essential financial services. Without the tax exemption, credit unions would be forced to raise rates and fees, increasing costs for families and small businesses that count on them for accessible, low-cost financial products. It would also weaken communities, reducing the resources available for local businesses, financial education, and community development initiatives.
Credit unions are already facing financial pressures amid shifting economic conditions. According to the latest trend report, credit union loan balances are expected to grow 5% in 2025, rebounding from 2.8% growth in 2024, yet still below pre-pandemic trends. Meanwhile, credit unions added 3.3 million members in 2024—the slowest growth since 2014—highlighting a challenging lending and deposit environment. Taxing credit unions at this critical time would only compound these pressures, restricting their ability to serve communities that banks have long overlooked.
CrossState will not waver in its defense of the credit union tax exemption. We are working tirelessly alongside our state and regional leagues, the American Association of Credit Union Leagues (AACUL), and America’s Credit Unions to ensure lawmakers understand what’s at stake—and will continue advocating to protect the unique role credit unions play in strengthening financial well-being and economic opportunity.
Taxing credit unions would harm communities, not just institutions
The call for credit unions to be taxed like banks fails to recognize the significant contributions credit unions make to our communities. Taxing credit unions like banks would strip members of billions in financial benefits and drive up costs for consumers.
In New Jersey, every $1 in tax-exempt status returns $49 in direct benefits to members; in Pennsylvania, it returns $9.30. These benefits don’t enrich executives or outside shareholders—they go straight to the people who rely on credit unions for lower loan rates, better savings, and fairer financial services.
Credit unions reinvest their earnings into the communities they serve—supporting local businesses, funding community projects, and offering financial education programs. This commitment to community development further distinguishes credit unions from their for-profit counterparts and underscores the importance of their tax-exempt status.
Credit unions are essential for economic strength
Credit unions are not only financial institutions; they are vital partners dedicated to improving the financial well-being of their members. They play a crucial role in our financial ecosystem by providing affordable and accessible financial services, particularly to those of modest means.
Their unique structure, mission, and commitment to community development justify their tax-exempt status. Let’s continue to support our credit unions—not challenge their rightful tax status that allows for important investments in the financial health and strength of our communities.
The facts speak for themselves: credit unions are, and always have been, fundamentally different from banks. Their continued tax exemption is not just justified; it’s essential for the communities they serve.
