Why are credit unions tax-exempt?
Credit unions were granted their tax exemption because of their not-for-profit, cooperative structure and the benefits of cooperative service to society, because they are democratically organized generally managed by volunteer board of directors, and because their specified mission is to meet the credit and savings needs of their members, especially persons of modest means. Early in the history of credit unions, the U.S. Attorney General declared state-chartered credit unions exempt from federal income taxes because they were “organized and operated for mutual purposes [in which an organizations members share in the profits and expenses] and without profits.” Later on, in the 1930s, legislators passed a law to exempt federally chartered credit unions from federal income tax for the same reason. Congress reaffirmed credit unions’ tax status as recently as 1998 in the Credit Union Membership Access Act.
