How wildfire relief shows the power of the credit union tax status
Current relief efforts, including the National Credit Union Foundation's CUAid disaster relief program and resources from the California Credit Union League, are helping affected credit union employees and volunteers weather the crisis. And this isn't the first time credit unions have stepped up in the face of a catastrophic blaze.
When wildfires devastated Northern California in 2017, Redwood Credit Union stepped up to help affected communities by creating and managing a North Bay Fire Relief Fund that ultimately raised over $32 million in four months.
Redwood focused on serving people: waiving fees, offering emergency loans, and distributing donations directly to residents who had lost their homes. Redwood's example remains a powerful illustration of how the credit union tax status empowers institutions to put people first—especially during times of crisis.
Why this matters
- Tax status connection: Because credit unions don't pay corporate income tax on profits, they can prioritize members and the greater community. For Redwood, this not-for-profit structure meant every available dollar could go towards helping those who needed it most, rather than into shareholder dividends.
- Big impact on everyday Americans: Redwood's story highlights a bigger phenomenon: more than 140 million Americans currently rely on credit unions. Across the country, credit unions continually leverage their tax status to provide better rates, lower fees, and crucial services that strengthen neighborhoods and families.
Credit unions by the numbers
Credit unions serve a wide swath of the public but hold only 8.8% of financial assets, compared to banks' 91.2%. Despite this modest share of assets, credit unions still managed to provide $35.9 billion in financial benefits—ranging from affordable loans to waived fees and higher interest on savings. This is possible precisely because they're not-for-profit, returning earnings to members and local communities.
43% of Americans choose credit unions for their financial needs, and the credit union tax status delivers a 1,300% return on investment—with $2.8 billion in federal "cost" generating $35.9 billion in benefits for members and non-members.
A historic mission, recognized by Congress
For more than a century, credit unions have existed to serve individuals who might otherwise be overlooked by for-profit banks—farmers, small business owners, and families in need. Congress solidified this mission into law through the Federal Credit Union Act, and the credit union tax status has been upheld by multiple administrations across party lines. The story of Redwood Credit Union's wildfire relief efforts is just one of many modern examples of credit unions' century-long commitment in people helping people.
Yes, credit unions already pay taxes
There's a misconception that credit unions don't pay taxes. In reality, they pay:
- $23 billion in federal taxes
- $13 billion in state and local taxes
- Payroll, property, and other taxes in their communities
The difference? Credit unions do not pay federal income taxes on profits—precisely because those "profits" (or "surplus") are redistributed to members in a variety of ways. That includes better rates, waived fees, dividends distributed to all members instead of only select shareholders, and community outreach programs like the wildfire relief fund.
When new taxes threaten credit unions—and communities
Legislators are currently considering tax reforms. That's led some to urge Congress to tax credit unions like big banks, questioning the value of the tax status. Doing that would be a mistake. Examples of why are found in Redwood's story and the countless other examples that demonstrate how credit unions step up when others step away: a new tax on credit unions is effectively a tax on 140 million members, including teachers, firefighters, and small business owners.
If this tax status is compromised, loan rates may rise, savings returns could drop and community initiatives—like disaster relief—would face tighter budgets.
Take action: Help protect the credit union tax status
Credit union professionals are on the front lines in showing how this not-for-profit model makes a difference. Let your elected officials know that any push to add more taxes on credit unions undermines critical support for the very people they represent.
- Make the voices of your members heard: Have your credit union run Project Zip Code, share information about the credit union difference and issues that impact members by using the Member Activation Program, and support outreach through the National Advocacy Fund. Credit union-specific resources are available here.
- Share your story: Visit Don't Tax My Credit Union to find tools and talking points tailored for credit union staff, volunteers, and leagues to take action.
- Amplify the benefits: Remind lawmakers and the public that every dollar credit unions don't pay in corporate income tax goes back to members and local economies.
- Champion the credit union difference: Whether it's community grants, financial literacy programs, or outreach efforts making an impact on people's lives, credit unions stand out by putting people over profits.
The heart of the issue
Credit unions' not-for-profit tax status doesn't just benefit the 140+ million Americans they serve; it can be the deciding factor in how fast and effectively a community rebounds from crisis. Redwood Credit Union's wildfire response was proof positive: when an institution's "surplus" is channeled directly to people rather than shareholders, entire regions can bounce back stronger.
This is a difference worth protecting. By preserving the credit union tax status, we ensure that-whether they are facing everyday financial needs or natural disasters—people remain at the heart of credit unions' mission.