Don't Tax My Credit Union

You may have noticed a lot of recent discussion regarding taxes on credit unions. Lawmakers and the current administration are currently discussing tax reform. As a piece of that discussion, they’re looking at changing the credit union federal income tax status. As a member of a credit union, this isn’t just a tax on your financial institution—it’s a tax on you.
Credit unions pay billions in state and local taxes each year. If Congress moves ahead with this revision and taxes the profits on credit unions, this will directly affect you as a member. These profits are returned to you in the form of fewer fees, better rates on loans, and higher dividend earnings.
The Formation of Early Credit Unions
Credit unions have existed in the United States for more than 100 years. St. Mary’s Cooperative Credit Association, formed in 1908, was the first credit union ever in the United States. Two influential figures, Pierre Jay and Edward A. Filene, joined forces to create the first general statute establishing credit unions in the U.S., known as the Massachusetts Credit Union Act.
Significant progress was made surrounding credit unions around 1929. This was in large part due to the stock market crash which ultimately led to the Great Depression. With limited options, countless Americans turned to credit unions during this troubling time.
From here, credit unions continued to serve America and its citizens during difficult times. Specifically, credit unions sold 12 million war bonds during World War II. In today’s money, these sales would equate to more than $5.7 billion towards the war effort. The passage of the Revenue Act in 1951 granted federal and state-chartered credit unions an exemption from federal income tax.
Why are Credit Unions Exempt from Federal Income Tax?
The Revenue Act of 1951 aimed to raise revenue through increases on individual and corporate incomes. When considering this, it’s crucial to remember how credit unions operate differently from banks or other financial institutions. Credit unions are not-for-profit, pro-member financial institutions where the members and their financial needs always come first.
This core difference between banks and credit unions is why this status was bestowed to credit unions. When banks profit, the money goes directly to the shareholders who own stake in the bank’s company. As a member of a credit union, you are part owner and one of those stakeholders.
Other organizations, like churches and nonprofits, are also exempt from federal income tax. When you think of these organizations and credit unions, they all share the common mission of supporting the local community. Each gives back to the community or groups of underserved individuals in a variety of ways, and this tax status allows them to complete this honorable work.
How Do Credit Union Members Receive Profits?
Credit union members receive profits in the form of fewer and lower fees, lower rates on loans, and higher rates on savings, money market, and interest-earning checking accounts. These kinds of rewards provide peace of mind to members and help them in achieving milestones, such as buying a home or purchasing a new car.
These profits are enjoyed by all members as each is a partial owner in the credit union. All credit union members have a voice in electing in a Board of Directors, who make decisions and oversee the credit union in the best interests of the membership. This is vastly different from a bank, which has shareholders who drive decisions in the interests of profits, which they reap the benefits of themselves.
Lawmakers are Aiming to Tax Credit Unions
Lawmakers are currently moving quickly to push forward tax reform. One of the elements of this reform includes removing the tax exemption for credit unions. A tax on your local credit union is a tax on you, as you’d not be able to enjoy the same benefits and rates that you typically can as a credit union member. Also, this reform is a tax on you as you pay the taxes on the dividends you earn from your credit union.
It’s also crucial to remember that credit unions still pay billions each year in state and local taxes. Beyond just the benefits to members, this tax exemption allows credit unions to operate as the community resources they were intended to be since the beginning. American Heritage, like countless other credit unions across the country, has strived since its inception to be an asset and resource to the communities it proudly serves.
One major way American Heritage supports the local community is through various volunteer efforts, food and other goods collections, and community events held throughout the year. In 2024 alone, American Heritage and its associates completed over 1,300 community service hours and donated more than 10,000 pounds of food to local food banks and shelters.
Additionally, American Heritage holds several community events throughout the year and raises funds for the Kids-N-Hope Foundation. In 1996, American Heritage Credit Union became the first credit union in the country to form its own charitable organization when it began the Kids-N-Hope Foundation. The Foundation raises funds for pediatric health and life services, namely music therapy. To date, over $4.4 million has been raised and more than 9,000 children have benefitted from these services.
Your Support and Voice Matter
Your voice needs to be heard on this issue! Let your local lawmakers know how you feel about this issue by submitting a simple, pre-written email that tells them not to tax your credit union. By simply filling in your name and email, you can send this email in seconds, courtesy of CrossState Credit Union Association, here.
More than 140 million Americans are served by credit unions. Imagine if we each let our lawmakers know our sentiments on this issue. Our combined voices can prove to be an invaluable tool in the Don’t Tax My Credit Union movement.
Credit unions have always stood as a beacon and a resource for underserved individuals and communities. These opportunities could go away if this new tax reform is imposed. This movement extends far beyond American Heritage—it represents all 4,617 credit unions throughout the United States. Let your voice be heard!, and learn more about the Don’t Tax My Credit Union movement here.