By Ray Birch
WASHINGTON— With the credit union tax exemption this year facing what may be its greatest challenge, some credit unions are exploring their options in case the fight is lost. One possibility under discussion, according to one analyst, is converting to a bank.
Credit union consultant Jeff Rendel, a certified speaking professional and principal of Rising Above Enterprises, spoke with CUToday.info about what he is hearing from credit union CEOs. He emphasized that this year the concern over the movement losing its tax exemption is “genuine.”
Rendel said most credit unions that are taking some kind of action today are running what-if scenarios—evaluating what losing their tax status would mean to the bottom line and to their members. But some are looking at what’s involved in converting to a bank, he said.
“Of the CEOs running these types of tabletop exercises, all insist that this is a last-resort option. While the CEOs and I agree that the credit union charter and model is best, the foresight to plan for any circumstance is understood and valuable,” Rendel explained.
Rendel pointed to one CEO who said his organization may seriously review conversion to a bank if the tax exemption is lost.
As CUToday.info has extensively reported, the CU Tax fight this year is tougher, as the Trump Administration looks for ways to cut costs and find money to support the budget bill.
“There is heightened concern this year among credit union CEOs that the possibility of taxation is real,” Rendel said. “The concern is genuine.”
Rendel said that is leading CU bosses to be much more active on the advocacy front in 2025.
“They are actively explaining to Congress the credit union difference, the fact that they are committed participants and contributors to the local and overall economies—which generate taxable income,” he said. “There is a greater awareness among credit union leaders this year about showcasing the impact that credit unions have in the local economy, especially as it relates to tax bases. One CEO shared that basis points removed from a credit union’s operations can translate into resources that cannot be leveraged into member loans, low fees—if any—and additional investment in member service.”
Bigger Assault
A great deal of the concern among CUs is being driven by a much bigger assault on credit unions’ tax status by the bank lobby, Rendel said.
“They are focused in their efforts,” he said. As we know, their messages to Washington are heavily directed on the amount of revenue the government is missing by not taxing credit unions.”
Rendel shared that large credit unions merging and credit unions acquiring banks certainly fuel the banks’ attacks, adding those messages are one-sided.
“More members—new, merged, or acquired—receiving better pricing, personal service, and outstanding experiences because of growth and efficiency is good,” Rendel said. “The credit union tax exemption is a proven investment in local economies that drives growth in consumer and small business sectors.”
Rendel said he is aware of about a half dozen credit union leaders who are presenting several strategic options to their boards to address the potential loss of the tax exemption.
“Strong scenario and contingency planning are a must in any executive suite. Many CEOs are investing time and resources into understanding all strategic options in the event the tax exemption is eliminated,” Rendel said.
Options Being Considered
Rendel said credit unions are simply thinking through their options now.
“Much is involved in the bank conversion scenario, most important being a member vote,” Rendel said. “CEOs have shared with me that, ultimately, this is the members’ credit union. As leaders, it is a duty to protect and advance their credit union through sustainable operations, the ability to serve and grow, and being the strongest of advocates for the future. When we understand all options, we are in a better place to make sound strategic recommendations.
“CEOs continue to share with me that the credit union model is strong, needed, and valued in the economy,” concluded Rendel. “They remind all credit union leaders that legislators need to fully understand the value that the tax-exempt status of credit unions provides to members, small businesses, and communities across the land. All stakeholders are better off because of credit unions and the cooperative business model.”