DCUC Letter to U.S. Senate Banking, Housing, and Urban Affairs Committee, Opposing Tax Reform Harmful to Credit Unions
Today, the Defense Credit Union Council (DCUC) sent a letter to Senators Elizabeth Warren (D-MA), John Kennedy (R-LA), and each office of the Senate Banking, Housing, and Urban Affairs Committee providing its comments for the upcoming September 18, 2024, hearing titled, "The Macroeconomic Impacts of Potential Tax Reform in 2025."
DCUC voiced its opposition to any proposal that would undermine or eliminate the longstanding nonprofit, tax-exemption of credit unions. The letter emphasized that removing credit unions’ tax exemption would have severe consequences for thousands of consumers nationwide, including our Nation’s servicemembers, veterans, their families, and underserved communities.
“Credit unions operate under a cooperative, not-for-profit structure, which fundamentally distinguishes them from for-profit financial institutions. Credit unions are member-owned, meaning that every member is a partial owner with equal voting rights, regardless of their account balance,” said Jason Stverak, DCUC Chief Advocacy Officer. This model aligns credit unions directly with the needs of their members, as there are no outside shareholders to serve or profits to maximize.”
DCUC also balanced its position by providing historical reference to the Credit Union Membership Access Act (CUMAA), in which Congress recognized and reaffirmed the important role credit unions play in providing access to financial services for individuals and communities that might otherwise be underserved. “The not-for-profit, member-owned structure of credit unions has not changed since that time, and the rationale for their tax exemption remains as valid today as it was decades ago,” said Stverak.
DCUC emphasized defense credit unions’ critical role in providing military personnel and veterans members tailored financial services and how these communities would be directly impacted should Congress move to eliminate credit union tax exemptions.
“The elimination of the tax-exempt status would likely lead to higher fees, reduced access to affordable loans, and decreased savings rates. Eliminating the tax-exempt status of credit unions would undermine their ability to continue providing these essential services. Military families often face frequent relocations, unpredictable financial circumstances, and challenges related to deployments. Credit unions have a long history of offering support tailored to these circumstances, often at a lower cost and with more flexibility than for-profit financial institutions. For example, credit unions are often the first to offer loan deferrals or emergency assistance during times of crisis, such as government shutdowns or natural disasters. This flexibility is made possible in large part due to the tax-exempt status that allows credit unions to reinvest any surplus into member services, rather than distributing profits to shareholders.”
DCUC's letter also addressed the unfairness of comparing credit unions to for-profit banks, pointing out that banks are driven by shareholder profits, while credit unions exist to serve their members. Additionally, DCUC noted how banks already benefit from various tax breaks and that eliminating credit unions’ tax exemption while leaving bank subsidies intact would place credit unions at a significant disadvantage.
“This hearing is an indication that multiple committees are looking at tax reform already, and DCUC expects more activity on this front as next year begins to take shape on Capitol Hill,” says Anthony Hernandez, DCUC President/CEO. “It’s incredibly important we continue to urge Congress to protect and preserve the tax exemption just as they have done historically. This will ensure credit unions can continue to fulfill their mission of providing affordable, member-focused financial services, especially to those who serve or have served our country.”
