DCUC Urges ICBA to End Push to Tax Credit Unions
By DCUC Staff —
Hernandez challenges bank tax double standard and defends credit union members.
WASHINGTON, DC — The Defense Credit Union Council (DCUC) is calling on the Independent Community Bankers of America (ICBA) to withdraw its proposal to tax credit unions with more than $1 billion in assets. In a detailed November 5 letter to ICBA President and CEO Rebeca Romero Rainey, DCUC President and CEO Anthony Hernandez challenges the proposal’s factual and policy foundations and warns that its costs would fall on member-owned institutions serving military families, veterans, and other working Americans.
The letter responds point by point to Rainey’s November 2 American Banker commentary. It includes 14 substantive sections addressing cooperative ownership, Subchapter S banks, acquisitions, small-business and mortgage lending, transparency, and the consequences for credit union members. “A credit union does not stop belonging to its members when it grows,” said DCUC President and CEO Anthony Hernandez. “ICBA’s proposed tax would take resources from institutions owned by military families, veterans, and working Americans. Congress should protect their ability to choose a cooperative that puts their financial needs first.” The letter identifies a central inconsistency in ICBA’s campaign: many community banks do not pay ordinary federal corporate income tax at the institutional level. The Federal Reserve Bank of Kansas City reported that 1,447 community banking organizations, or 38 percent, had elected Subchapter S treatment as of September 30, 2024. Those institutions generally pass income through to shareholders who owe tax; certain institutional taxes can also apply. The letter makes clear that this lawful structure does not mean banks or their owners pay no taxes. DCUC also points to ICBA’s own tax platform, which seeks a tax exclusion for community-bank retained earnings and expansion of an agricultural-lending interest-income exclusion from 25 percent to 100 percent. “ICBA defends tax advantages for bank owners while demanding that Congress strip away the tax treatment that preserves resources for credit union members,” Hernandez said. “When banks retain earnings, ICBA calls it support for community lending. Credit unions use retained earnings to serve their communities, too. Congress should reject that double standard.” Among the letter’s other findings and arguments: Size does not erase cooperative ownership. Congress reaffirmed in 1998 that credit unions’ tax treatment reflects their nonprofit, democratic structure and service mission. Crossing an asset threshold does not create outside shareholders or eliminate member ownership. The $2.6 billion claim does not measure the full public impact. ICBA’s hypothetical estimate combines federal and state income taxes and is not an official revenue score of repeal legislation. The letter calls for consideration of member costs, lending, and capital. NCUA’s December 2025 rate comparison showed average five-year new-car loan rates of 5.44 percent at credit unions and 7.41 percent at banks. Acquisition claims require context. Profitable bank owners may voluntarily choose a credit union buyer, subject to applicable approvals. Changes in SBA lending and mortgage denial rates do not, by themselves, establish that an acquisition caused harm. DCUC calls for disclosure of methods and comparisons with similar markets and bank-to-bank transactions. Fraud and transparency concerns require specific remedies. The letter recognizes that public Call Reports do not duplicate every Form 990 disclosure. It calls for addressing information gaps, internal controls, and supervision rather than treating an income tax as a fraud-prevention tool. The letter also challenges ICBA’s use of the Jackson Area Federal Credit Union failure to support its broader campaign. NCUA reported approximately $60 million in assets at Jackson Area and $1.261 billion at Five Star Credit Union, which assumed members’ share accounts. ICBA’s proposed threshold would therefore reach the larger cooperative that stepped in to preserve service, while the failed institution was below it. “For a military family facing a deployment, a move, or an interruption in pay, the resources available at their credit union have real consequences,” Hernandez said. “A new tax would leave less for lending, reserves, and member assistance. We will strongly defend the tax status of credit unions of every size because the people who own them deserve that defense.” The response builds on DCUC’s July 2025 request for Treasury scrutiny of Subchapter S banks and its 2026 letter to Congress defending credit union tax status. Hernandez urges ICBA to withdraw the $1 billion threshold, acknowledge bank tax preferences, and publish the evidence and comparisons behind its acquisition claims. The full letter accompanies this release.
1627 Eye Street, NWSuite 935Washington, DC 20006202.734.5007[email protected]
ALERT NewsletterArmed Forces Financial NetworkFinancial Education ResourcesVeterans Benefits Banking Program
Copyright Defense Credit Union Council. All Rights Reserved.
Originally reported by DCUC.