Since the early 1900s, Congress and state legislatures have taxed credit unions differently than banks because of their different ownership structures. For-profit banks are in business to make a profit for the stockholders who own them. Not-for-profit credit unions are cooperatives, with all members being equal owners and having one vote in the election of the board of directors. Furthermore, credit union boards are made up of volunteers who, unlike bank directors, are not compensated. As cooperatives, credit unions pass their earnings on to all members in the form of lower rates on loans, reduced fees and higher returns on savings.
Credit Unions Do Pay Taxes.
Iowa’s state-chartered credit unions pay state sales tax, property tax, employer-related taxes, and a moneys and credits tax — which is assessed against their required reserves. Congress exempts federal credit unions from state and federal income tax as well as state sales tax.