Credit Union Growth, Bank Acquisitions, and the Question of Tax Exemption: A Tax Day Reality Check

04/15/26

April 15 is a familiar date for every taxpaying American, and for every taxpaying business. For banks across Ohio and the country, it's a reminder of a fundamental part of operating in a regulated, competitive marketplace: contributing to the public coffers that support our communities. Increasingly, however, it is also a reminder that not all competitors operate under the same rules.

A growing trend in financial services underscores this disparity: credit unions acquiring banks.

Originally chartered to serve individuals of "modest means" within defined fields of membership, credit unions were granted federal tax-exempt status as not-for-profit cooperatives with a narrow mission. That rationale becomes harder to reconcile with today's reality. Credit unions now represent a multi-trillion dollar industry with more than 140 million members nationwide and, in many cases, operate indistinguishably from full-service commercial banks.

Nowhere is this evolution more apparent than in the rising number of credit union bank acquisitions. According to recent data, these deals accounted for more than a quarter of announced bank mergers in recent periods, an unprecedented share. These transactions are not about serving an existing membership base; they are strategic expansions into new markets, customer segments, and commercial lending lines.

And they are enabled, in part, by a structural advantage: tax exemption.

Unlike banks, which paid over $14 billion in taxes in 2023, credit unions paid effectively zero income or business taxes at the federal or state level, even as many compete directly in the same markets and product lines. That advantage is not theoretical. It translates into higher retained earnings, stronger capital accumulation, and, critically in acquisition scenarios, the ability to make all-cash offers that can outbid taxpaying institutions.

As noted by the National Credit Union Administration itself, acquisitions are often pursued to expand geographic footprint or grow loan programs, not to deepen service to an existing member base. The Federal Reserve has similarly observed that credit unions are increasingly competing across the full "cluster" of banking services.

This raises straightforward policy questions, particularly appropriate for Tax Day: does the current tax exemption still align with the modern credit union business model? Have some credit unions graduated to a new level beyond their original mission?

The National Taxpayers Union has highlighted this tension, noting that as credit unions expand into commercial lending, nationwide membership, and bank acquisitions, the justification for preferential tax treatment becomes increasingly tenuous. At a minimum, it warrants renewed congressional and state scrutiny, something that has not occurred in nearly two decades.

Importantly, this is not an argument against competition. Ohio banks compete every day and do so effectively. But competition should occur on a level playing field, with consistent expectations around taxation, transparency, and community obligations such as the Community Reinvestment Act, which does not apply to credit unions.

There are also downstream implications. When a taxpaying bank is acquired by a tax-exempt credit union, communities may lose not only a source of tax revenue but also a regulatory framework designed to ensure reinvestment and accountability. Consumers, meanwhile, may find themselves with fewer protections and less transparency post-transaction.

So, as April 15 comes and goes, it is worth asking: in a financial services marketplace where institutions increasingly look alike, compete alike, and grow alike, should they not also be taxed alike?

That question is no longer theoretical. It is increasingly urgent.