Credit unions were chartered in 1934 with the noble purpose of providing credit services to modest to low income consumers who shared a common bond. Congress granted credit unions a federal income tax exemption reserved for nonprofits and charities to better fulfill that mission. Eighty-plus years later, it has become increasingly clear that the largest credit unions have strayed far from their original mission while credit union regulators have turned a blind eye. Their regulators readily rubber-stamp the steady mission creep and allow credit unions to offer services far beyond their initial charter.
Today, there are 304 large credit unions that each have more than a BILLION dollars in assets but are required to pay ZERO in federal income taxes. Although these billion dollar credit unions make up just 5% of the credit union industry, they enjoy 75% of the tax benefit, leaving small credit unions who have stuck to their original mission at a competitive disadvantage.
And even more alarmingly, American taxpayers are poised to make up for credit unions’ federal income tax exemption to the tune of more than $20 billion over the next ten years. That’s $20 billion that could be used for important federal programs or to shore up the federal deficit.
Congress never intended for allegedly nonprofit credit unions to take advantage of their tax status by sponsoring NFL teams and NBA arenas, showering executives with multi-million dollar compensation packages, and buying banks and ad agencies. But that’s exactly where the tax-exempt dollars are going to increase large credit unions’ own profits.
The jig is up. It’s time for large credit unions to pay their own way.