No Threat to Credit Union Tax Status in House GOP Tax Package, DCUC Remains Vigilant Through Legislative Process

Anthony Hernandez

​The Defense Credit Union Council (DCUC) confirms that the long-anticipated tax package unveiled by House Republicans contains no mention of credit unions or proposals that would alter their longstanding federal tax exemption.
 
The 389-page package, which includes a mix of tax cuts and revenue offsets, was released today ahead of a scheduled markup by the House Ways and Means Committee on Tuesday afternoon. While the current text poses no direct threat to credit unions, DCUC cautions that the legislative process is far from over — and remains on high alert for any late-stage amendments or additions that could impact the industry.
 
“Nowhere in the bill is there any reference to ‘credit unions,’ ‘federal credit unions,’ or 501(c)(14) tax-exempt entities,” said Jason Stverak, DCUC Chief Advocacy Officer. “There are no proposed changes to the Internal Revenue Code that would affect the credit union tax-exempt status, nor does the bill introduce Unrelated Business Income Tax (UBIT) provisions or modifications to NCUA oversight.”
 
Regardless of this positive development, DCUC will continue to monitor the process closely. The reconciliation process — particularly in a divided Congress — leaves the door open for amendments, including those that could be introduced with little notice.
 
“As we’ve seen in the past, harmful provisions can be added at the last minute, sometimes in the dead of night,” said Anthony Hernandez, DCUC President/CEO. “That’s why we are staying engaged with every step of the process — from markup to floor debate — and working in lockstep with leagues, member credit unions, and the broader ‘Don’t Tax My Credit Union’ coalition to ensure policymakers fully understand the critical value our institutions bring to the communities we serve.”
 
Key Context:
The current legislation primarily focuses on extending provisions from the 2017 Tax Cuts and Jobs Act (TCJA), including:

• Individual tax rate reductions
• Expansion of the child tax credit
• Deductions for overtime and tipped income
• Increased Qualified Business Income (QBI) deduction
• Enhancements to 529 education savings plans and tax credits

None of these provisions impact the not-for-profit structure or tax treatment of credit unions.

Looking Ahead
DCUC urges credit unions to remain alert and ready to mobilize should any provisions emerge that threaten the tax-exempt status. While the current bill is free of such language, the potential for Senate revisions or behind-the-scenes negotiations remains.
 
“Protecting the credit union tax exemption is about preserving access to affordable financial services for our members — especially for military families who rely on us in ways traditional banks often don’t match,” Hernandez added. “This exemption is not a loophole; it’s a recognition of our mission. And we will defend it with unwavering determination.”
 
Last week, DCUC sent a letter to House Ways and Means Committee Chairman Jason Smith and Ranking Member Richard Neal, urging lawmakers to preserve the federal tax-exempt status of credit unions as Congress considers potential tax reforms.
 
In the letter, Stverak highlighted the value provided by credit unions, including lower fees, competitive rates, and access to essential financial services on military installations—often in remote or underserved areas where traditional banks are absent; strengthening financial readiness and national security.
 
Key points in the letter included:

• Consumer and Economic Impact: Credit unions return $37 billion annually to members through better rates and lower fees. A recent economic study estimated that eliminating their tax exemption would shrink U.S. GDP by nearly $266 billion over the next decade and result in 822,000 lost jobs.
• Misconception of “Tax Loss”: The estimated $2.9 billion annual cost of the tax exemption yields over $297 billion in economic output—a return of more than $100 for every $1 of forgone federal revenue.
• Risks to Communities: Removing the tax exemption would force smaller credit unions to close or consolidate, leaving military bases and underserved neighborhoods vulnerable to predatory lending and financial exclusion.

 
DCUC also challenged claims of “unfair advantage,” noting that for-profit banks benefit from numerous tax strategies without delivering the same reinvestment to consumers or communities. DCUC called for any review of credit union tax status to be accompanied by a full examination of bank tax practices.
 
“The credit union tax exemption is a critical investment in America’s communities, not a cost to the government,” said Stverak. “Any conversation about tax reform must include the full picture — that credit unions return far more to consumers and the economy than they receive in tax benefits. We urge lawmakers to stand firm against misguided proposals that would harm military families and working Americans.”
 
For more information, please contact Jason Stverak at [email protected] and visit dcuc.org/advocacy.

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