ICBA: Congress Must Investigate Credit Union Tax Exemption

The Independent Community Bankers of America (ICBA) has called for congressional action over bank deals involving credit unions after a flurry of deals were announced in late August.

Five deals were announced this week, including Michigan State University Federal Credit Union’s (MSUFCU’s) acquisition of Algonquin State Bank and McHenry Savings Bank and Alabama-based Five Star Credit Union has agreed to purchase Georgia-headquartered OneSouth Financial, parent to OneSouth Bank.

ICBA president and CEO Rebeca Romero Rainey issued a statement in response to the acquisitions urging Congress to investigate the credit union tax exemption and “its harmful impact on local communities”.

She said: “The surge in credit unions leveraging their taxpayer subsidies to acquire local community banks has devastating implications for local communities that go well beyond their expansion of the federal tax exemption for more than $2 trillion in credit union assets.”

The ICBA compared credit unions’ tax exemption, worth nearly $4 billion per year, with the $12 billion in tax revenue community banks contributed in 2020.

Rainey said: “Credit union executives can combine their members’ capital with the savings from their tax exemption to make inflated all-cash offers to buy out healthy community banks in largely private, nontransparent deals.”

The ICBA has demanded that Congress hold hearings and request a Government Accountability Office study on the credit union industry, as well as consider an “exit fee” on these acquisitions to capture the value of the tax revenue lost once the acquired bank’s business activity becomes tax-exempt.

In 2021, the American Bankers Association (ABA) campaigned on the same issue, with CEO Rob Nichols criticizing the growing trend of credit unions buying community banks and calling for Congress to intervene.