FREQUENTLY ASKED QUESTIONS (FAQS)
Taxation and Credit Union Overview FAQ
No. Credit unions do not pay federal income taxes on their earnings. This tax exemption costs American taxpayers approximately billion per year.
Community banks, by contrast, are fully taxable. In 2024 alone, community banks paid $15.5 billion in income taxes, with nearly $90 billion expected between 2024 and 2028 — revenue that supports schools, healthcare, infrastructure, and public safety. When taxpaying community banks are acquired by tax-exempt credit unions, the tax revenue those banks generate is lost.
Credit unions were originally granted tax-exempt status because they were small, nonprofit cooperatives created to serve people of modest means — such as teachers, nurses, and government workers — who lacked access to traditional banking services.
Today, that justification no longer holds. Many credit unions have strayed far from their original mission and evolved into large financial institutions focused on breakneck expansion, exploiting their tax exemption to acquire taxpaying community banks, and funding lavish spending — including stadium naming rights and private jets.
Yes. Credit unions are still legally classified as nonprofit institutions, and that designation is the basis for their outdated tax exemption. As laid out in the answer above, many large credit unions generate billions of dollars in assets and income, pay executive compensation comparable to commercial banks, and pursue aggressive growth strategies that look nothing like a traditional nonprofit — raising serious questions about why they continue to receive special treatment under the tax code.
The credit union industry has grown dramatically. In 2023, credit unions held $2.3 trillion in assets nationally, a more than 400% increase since 2000. By the end of 2024, 451 credit unions each held more than $1 billion in assets, and those institutions generated $11.4 billion in net income in a single year. These are no longer small, member-focused cooperatives, but large financial organizations operating across multiple states or nationally.
These acquisitions often leave consumers and communities with fewer choices, less access to credit, and weaker local accountability.
Community banks are critical providers of small business, agricultural, and relationship-based lending, especially in rural and underserved areas. When credit unions acquire these banks, decision-making is frequently shifted to out-of-state or distant headquarters, and lending activity often declines.
Unlike community banks, credit unions are not subject to the Community Reinvestment Act (CRA), meaning they are not required to reinvest in low- and moderate-income communities. As a result, these takeovers can reduce access to capital for small businesses and working families while weakening the local financial ecosystem communities rely on.
Mortgage lending drops or stagnates in nearly half of affected communities, mortgage denial rates increase, and small business lending decreases following a credit union takeover. These trends suggest that credit unions frequently do not replace the lending activity of the community banks they acquire, reducing access to credit for local businesses and borrowers.
Mergers and acquisitions happen, but the credit union tax exemption creates an uneven playing field. Because credit unions do not pay income taxes, they have significantly more cash available to pursue acquisitions at artificially high prices. That advantage allows credit unions to outbid taxpaying banks and fuel deals that are not based on normal competitive conditions.
ICBA calls on policymakers to end the federal tax exemption for credit unions with $1 billion or more in assets or to establish tax parity between credit unions and community banks.
Credit Union vs. Community Bank: Comparison FAQ
Community banks are locally focused, taxpaying financial institutions that gather deposits where they make loans, reinvesting local dollars back into local businesses and households. They rely on relationship-based banking, with lending decisions made close to the customers and communities they serve.
Credit unions are tax-exempt nonprofit institutions that were originally created to serve community bond groups and people of modest means — but they have long since strayed from that mission, exploiting their tax exemption to build surplus instead.
No. Community banks are regulated by state and federal banking regulators and are subject to the Community Reinvestment Act (CRA), which requires them to meet the credit needs of their communities, including low- and moderate-income areas. Community banks also provide about 60% of all small business loans under $1 million and 80% of the banking sector’s agricultural loans, making them a critical source of local access to capital.
Credit unions are regulated by the National Credit Union Administration (NCUA) and are not subject to CRA. The NCUA spends 60% less time supervising credit unions than the FDIC spends supervising banks, and does not conduct fair-lending exams for state-chartered credit unions . In short, the NCUA provides a laxer regulatory landscape for credit unions than the government does for banks.
Community banks are open to the public and can serve anyone who meets basic account requirements.
Credit unions were originally limited to clearly defined membership groups based on a common bond, such as a shared employer or community. Over time, many credit unions have significantly expanded their fields of membership to cover broad geographic areas, multiple states, or large populations with little connection to the original group they were chartered to serve. This expansion has enabled large credit unions to artificially accumulate their surplus and grow rapidly while continuing to benefit from a tax exemption intended for much smaller, more limited institutions.
Taxation and Credit Union Overview FAQ
No. Credit unions do not pay federal income taxes on their earnings. This tax exemption costs American taxpayers approximately billion per year.
Community banks, by contrast, are fully taxable. In 2024 alone, community banks paid $15.5 billion in income taxes, with nearly $90 billion expected between 2024 and 2028 — revenue that supports schools, healthcare, infrastructure, and public safety. When taxpaying community banks are acquired by tax-exempt credit unions, the tax revenue those banks generate is lost.
Credit unions were originally granted tax-exempt status because they were small, nonprofit cooperatives created to serve people of modest means — such as teachers, nurses, and government workers — who lacked access to traditional banking services.
Today, that justification no longer holds. Many credit unions have strayed far from their original mission and evolved into large financial institutions focused on breakneck expansion, exploiting their tax exemption to acquire taxpaying community banks, and funding lavish spending — including stadium naming rights and private jets.
Yes. Credit unions are still legally classified as nonprofit institutions, and that designation is the basis for their outdated tax exemption. As laid out in the answer above, many large credit unions generate billions of dollars in assets and income, pay executive compensation comparable to commercial banks, and pursue aggressive growth strategies that look nothing like a traditional nonprofit — raising serious questions about why they continue to receive special treatment under the tax code.
The credit union industry has grown dramatically. In 2023, credit unions held $2.3 trillion in assets nationally, a more than 400% increase since 2000. By the end of 2024, 451 credit unions each held more than $1 billion in assets, and those institutions generated $11.4 billion in net income in a single year. These are no longer small, member-focused cooperatives, but large financial organizations operating across multiple states or nationally.
These acquisitions often leave consumers and communities with fewer choices, less access to credit, and weaker local accountability.
Community banks are critical providers of small business, agricultural, and relationship-based lending, especially in rural and underserved areas. When credit unions acquire these banks, decision-making is frequently shifted to out-of-state or distant headquarters, and lending activity often declines.
Unlike community banks, credit unions are not subject to the Community Reinvestment Act (CRA), meaning they are not required to reinvest in low- and moderate-income communities. As a result, these takeovers can reduce access to capital for small businesses and working families while weakening the local financial ecosystem communities rely on.
Mortgage lending drops or stagnates in nearly half of affected communities, mortgage denial rates increase, and small business lending decreases following a credit union takeover. These trends suggest that credit unions frequently do not replace the lending activity of the community banks they acquire, reducing access to credit for local businesses and borrowers.
Mergers and acquisitions happen, but the credit union tax exemption creates an uneven playing field. Because credit unions do not pay income taxes, they have significantly more cash available to pursue acquisitions at artificially high prices. That advantage allows credit unions to outbid taxpaying banks and fuel deals that are not based on normal competitive conditions.
ICBA calls on policymakers to end the federal tax exemption for credit unions with $1 billion or more in assets or to establish tax parity between credit unions and community banks.
Credit Union vs. Community Bank: Comparison FAQ
Community banks are locally focused, taxpaying financial institutions that gather deposits where they make loans, reinvesting local dollars back into local businesses and households. They rely on relationship-based banking, with lending decisions made close to the customers and communities they serve.
Credit unions are tax-exempt nonprofit institutions that were originally created to serve community bond groups and people of modest means — but they have long since strayed from that mission, exploiting their tax exemption to build surplus instead.
No. Community banks are regulated by state and federal banking regulators and are subject to the Community Reinvestment Act (CRA), which requires them to meet the credit needs of their communities, including low- and moderate-income areas. Community banks also provide about 60% of all small business loans under $1 million and 80% of the banking sector’s agricultural loans, making them a critical source of local access to capital.
Credit unions are regulated by the National Credit Union Administration (NCUA) and are not subject to CRA. The NCUA spends 60% less time supervising credit unions than the FDIC spends supervising banks, and does not conduct fair-lending exams for state-chartered credit unions . In short, the NCUA provides a laxer regulatory landscape for credit unions than the government does for banks.
Community banks are open to the public and can serve anyone who meets basic account requirements.
Credit unions were originally limited to clearly defined membership groups based on a common bond, such as a shared employer or community. Over time, many credit unions have significantly expanded their fields of membership to cover broad geographic areas, multiple states, or large populations with little connection to the original group they were chartered to serve. This expansion has enabled large credit unions to artificially accumulate their surplus and grow rapidly while continuing to benefit from a tax exemption intended for much smaller, more limited institutions.