Credit Union Tax Status

Authored By: Kristen Williamson on 7/28/2021


Credit Unions came into existence in Europe in the late 1800’s, when the famous Potato Famine devastated the European economy. A group of citizens came together to pool their money in order to save and borrow together, rather than turning to loan sharks for their lending needs.

Much like Europe during the 1800’s, the Federal Credit Union Act was enacted in the United States in 1934 during another economic devastation, the Great Depression. Once again, the building blocks of a credit union system were forged during dire need. During this time, Credit unions were particularly targeted toward rural workers who had very few options for trustworthy financial services.

To this day, credit unions still operate on a “people helping people” mission. Credit unions are often the financial institution ready and willing to serve families and small businesses who are overlooked by traditional banks. Credit unions are also typically locally-owned and extremely invested in the communities they serve. Thus, when the Federal Credit Union Act was written, credit unions were organized as “not-for-profit” entities. Not-for-profit organizations operate for a collective public or social benefit.

To take it a step further, credit unions are not only not-for-profit organizations- they are also cooperatives. This means that credit unions operate exclusively for their members. Therefore, all profits go back to the credit union’s membership in dividends, lower interest rate loans, enhancements to products and services, community initiatives, etc.

With our not-for-profit status, credit unions are exempt from paying federal income taxes. However, this does not mean credit unions pay no taxes at all. Credit unions do pay property, sales, and employer taxes, just like other not-for-profit organizations.

In fact, taxing credit unions would do very little in terms of addressing government budget issues. According to a study done by the Credit Union National Association (CUNA), if credit unions were taxed in 2019, the receipts would have accounted for only 0.04% of federal spending, which would fund federal government operations for only 3.7 hours.

Despite the very small impact the tax would have on our government, many credit unions would be greatly impacted by an additional tax burden. There would be considerably less room in our budgets to continue operations as normal. Credit union community impact would be particularly burdened by a tax increase.

Credit unions are uniquely positioned to utilize their not-for-profit services for the betterment of their local communities. Here at Members First, our community giveback program is called ‘The Community Difference Project (CDP)’. All philanthropic efforts are housed within our CDP, including volunteer efforts, donations to local non-profit agencies, and random acts of kindness.

Because of our not-for-profit status, the credit union movement is able to care for our members and our communities at an elevated level. After all, a credit union is only as successful as the financial wellbeing of its members.

As a credit union member, we appreciate your commitment to the credit union difference by supporting our tax status! To learn more about the credit union tax status, please visit


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9/22/2021 12:01 PM Curtis R. from Coleman, MI
Please consider opening credit union in Coleman MI Our current bank has been sold multiply times and is closing its doors to our small community
Reply From Members First Credit Union:

Hi Curtis, we are sorry to hear about your current bank. We appreciate your input, and we will pass this along. 

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