Credit Union Tax Exemption Advocacy
Credit unions are effectively “weaponizing” their tax subsidy and lax regulatory standards. Larger, out-of-market credit unions are displacing smaller, locally based community banks and other credit unions, creating an environment that is less competitive, has more systemic risk, and offers fewer choices for consumers and small businesses.
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Position & Background
Tax Exempt Status. ICBA urges Congress to end the unwarranted federal tax subsidy of growth-obsessed credit unions with $1 billion or more in assets and/or promote increased tax parity between credit unions and community banks.
Purchases of Community Banks. ICBA staunchly opposes credit unions’ exploitation of their tax subsidy and lax regulatory environment to acquire locally based community banks.
Lax Regulator. ICBA urges Congress to use its oversight authority to investigate the National Credit Union Administration’s failure to adequately regulate and supervise the industry and to adhere to the original purpose of the credit union tax exemption.
CUSOs. ICBA opposes expanded powers for credit union service organizations, which are independently owned, for profit, and not supervised by any federal agency, and supports legislation that would provide NCUA with authority to examine third-party service companies.
FOM. ICBA opposes NCUA’s weakening of safeguards on commercial lending, field of membership, and the growing use of credit union subordinated debt, which allows outside investors to exploit the credit union tax subsidy.
CRA. ICBA supports applying Community Reinvestment Act requirements to credit unions comparable to and with the same asset size distinctions as banks and thrifts.
Fair Lending. Credit unions should be subject to fair lending exams with the same frequency as banks.
Public Deposits. ICBA urges states to prohibit the placement of public deposits in tax-exempt credit unions.
Transparency. ICBA believes that federal credit unions should submit form 990 tax filings as do other tax-exempt organizations.
State Partnership. ICBA stands ready to partner with state banking association campaigns to raise awareness among state legislators and the public, urging them to protect community banks and the communities they serve.
Credit union acquisitions of banks continue to be at historic highs, totaling 16 total acquisitions in 2025. This past year saw the first deals in California and Texas, and several deals were initiated by serial acquirers of banks. Credit unions are effectively “weaponizing” their tax subsidy and lax regulatory standards. Larger, out-of-market credit unions are displacing smaller, locally based community banks and other credit unions, creating an environment that is less competitive, has more systemic risk, and offers fewer choices for consumers and small businesses.
Community banks have provided roughly 69.3% of Small Business Administration loans provided by banks and credit unions since 2010, compared to 2.8% from credit unions. Community bank lending has also been disproportionately higher in the highest-poverty counties, with community banks accounting for 76.5% of SBA lending in these counties since 2010, compared with just 1.8% from credit unions—showing community banks are dramatically outperforming credit unions in the lower-income communities, the same communities that credit unions were granted a federal tax exemption to serve.
Credit union expansion comes at a steep cost to the U.S. Treasury. Credit unions used their tax exemption to avoid paying nearly $4.3 billion in federal income taxes in 2025 while holding $2.5 trillion in tax-free assets. Credit unions use this tax exemption to inflate the purchase price of banks to one-and-a-half times book value. The 450 credit unions with $1 billion or more in assets represent 80 percent of the industry’s assets but comprise only 10 percent of the total number of credit unions. The industry is increasingly top heavy.
Credit unions have become larger, more complex, and bank-like in their size, powers, product and service offerings, and fields of membership. Credit unions comprise nearly half the country’s federally insured depositories. Credit union acquisitions of community banks and their branches have accelerated rapidly, with the last five years seeing approximately a 400 percent increase over the previous five years. NCUA has significantly deregulated field of membership (FOM) protections over that same time period. While FDIC reviews thousands of banks for compliance with CRA and fair lending laws every year, NCUA only conducts approximately 50 annual fair lending exams of credit unions and is not permitted to conduct fair lending exams of state-chartered credit unions.
State-level advocacy has been gaining momentum. To counter the negative impact of credit union-bank acquisitions, policymakers in several states have begun responding. Washington, Colorado, West Virginia and Tennessee are the most recent states to successfully beat back credit unions through legislation or court decisions.
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Letters & Testimonies
How Credit Union's Tax-Exempt Status Affects Your State
These state-by-state reports show how credit unions have exceeded their original mandate and how that unchecked growth has negatively affected local communities across every state.
