Iowa bankers are once again attacking credit unions’ tax status. For decades, state and federal policymakers have taxed credit unions differently than banks because we are not-for-profit financial cooperatives that exist to serve our members, not to make a profit. Credit unions’ tax status has never been based on our size or the number of services we offer.

Structure is the Basis for Tax Difference

  • Credit unions are not-for-profit financial cooperatives. We exist to serve our members, not to make a profit.
  • Banks are for-profit institutions that return profits to a select group of stockholders.
  • Credit unions are democratically-controlled institutions. Each member has equal ownership in the credit union and has one vote in electing the board of directors—regardless of how much money he/she has on deposit.
  • Banks are controlled by the limited number of stockholders that own the institution.
  • Credit unions’ boards of directors are volunteers, elected by and from the membership.
  • Banks’ boards are elected by the stockholders and are compensated.

Credit Unions Pay Taxes; Banks Have a Tax Loophole

  • Credit unions do pay taxes – payroll taxes, sales taxes, and property taxes. State chartered credit unions also pay a monies and credits tax on their reserves.
  • Banks have a significant tax avoidance tool. 60% of Iowa’s banks are organized under Subchapter S, which provides them substantial tax relief. In 2014, Iowa banks avoided paying $55.2 million in federal taxes by electing subchapter S status.
  • Our cooperative structure and tax treatment is benefitting Iowans’ pocketbooks. Credit Union members saved $104 million last year by receiving better rates on loans and lower fees at their credit union versus what they would have received at a bank.

Banks Dominate Market Share

  • Credit unions control approximately 12% of the financial assets in Iowa.
  • Banks control over 88% of the state’s financial assets.
  • Iowa Banks posted record profits in 2014 – $849 million!
  • If Iowa Banks think credit unions have it so good, why don’t they convert to be a credit union?
    • Answer: They’ll never do it. Banks would have to give up massive shareholder profits, endure restrictions on business lending and secondary capital and, instead, share their success with member-owners – like credit unions.
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