Tax-exempt credit unions shouldn’t access public funds: letter to the editor

In a new letter to the editor, ICBA community banker Jeff Dick says that credit unions wanting access to municipal deposits without contributing back to the communities they claim to serve is a bad deal for Virginia.

Details: In a letter to the Fairfax County [Va.] Times, the chairman and CEO of MainStreet Bank in Fairfax, Va., writes:

• Large credit unions continue to benefit from an outdated tax exemption, which cost Virginia $102.6 million in lost revenue in 2024 alone.

• Credit unions are also exempt from Virginia’s Bank Franchise Tax, which generated $31 million for the state and $141 million for localities in 2024, while community banks pay into that system.

• Credit unions now want access to municipal deposits—public funds generated by Virginia taxpayers—without contributing back to the communities they claim to serve, which means fewer local dollars for critical services.

• Unlike community banks, credit unions are not governed by the Community Reinvestment Act, which requires institutions to meet the credit needs of the areas where they operate.

• If credit unions want to function like banks, they should be taxed and regulated like banks.

ICBA View: ICBA urges states to prohibit the placement of public deposits in tax-exempt credit unions and supports applying CRA requirements to credit unions comparable to and with the same asset size distinctions as banks and thrifts.

Growing Media Scrutiny: The letter to the editor joins a growing chorus of opposition to credit union mission creep:

• A Tyfone op-ed from ICBA Past Chairman Brad Bolton and ICBA leadership community banker Ken Hale spotlights why policymakers should examine credit union acquisitions of community banks.

• In op-eds in the Natchitoches Parish Journal and the Shreveport Bossier Journal, Hale details how credit union acquisitions of community banks harm local communities.

• Recent op-eds in American Banker and RealClear Markets target the credit union tax exemption following ongoing ICBA advocacy.

• A previous article in The Banker—an imprint of the Financial Times—says some credit unions may be abandoning their mission with “Wall Street-style” behavior and no longer serving their core members.

Recent ICBA Advocacy: ICBA is calling on policymakers to end the federal tax exemption for credit unions with $1 billion or more in assets to uphold market choice for small businesses and consumers while addressing taxpayer-subsidized consolidation.