Op-Ed: Indiana Academic Offers Options for Ending Credit Union Tax Exemption

As the concerning trend of tax-exempt credit unions purchasing taxpaying banks persists, an Indiana academic raised the question of whether credit unions making such acquisitions should consider to enjoy their exempt status. In a recent op-ed in the Evansville Courier and Press, University of Southern Indiana professor Thomas Noland highlighted how credit unions have dramatically exceeded the statutory justification for their tax exemption—serving communities of modest means whose members shared a common bond—through the loosening of membership rules and significant expansions.

“Proponents for credit union tax exemption point out that credit unions generally offer more favorable rates on loans and deposits thus saving members money and stimulating the economy,” Noland wrote. “This same argument could be made by banks if they were tax exempt.”

Noland suggested several options for leveling the playing field between banks and credit unions, including eliminating income taxes on banks, making a credit union acquisition of a bank “an automatic triggering event that creates a taxable entity” or taxing credit unions over a specific asset size.