When a handful of United Airlines employees banded in 1935 to get loans at fair rates amid the Great Depression, they could not have imagined the modest collective they were forming would grow into a multibillion-dollar enterprise. Yet, that organization, originally incorporated in Hangar 3 at Chicago’s Midway Airport, has morphed into one of the largest financial institutions in the country, with 900,000 members nationwide and $20 billion in assets. Its president made $3 million in salary last year.
Despite its massive size and reach, Alliant Credit Union, as the financial giant is now known, still enjoys benefits otherwise reserved for the humblest nonprofits, including an exemption from paying federal income taxes.
And it’s not slowing down. Alliant remains laser-focused on getting bigger, now offering services to anyone who makes a one-time $5 contribution to its foundation. And Alliant will cover the cost.
There’s nothing inherently wrong with this, of course. Businesses should want to grow! However, this approach conflicts with credit unions’ original purpose of serving those living within close geographic boundaries, sharing an employer, or belonging to the same local faith-based organization. Organizations are allowed to pivot and adopt new missions, but tax policy should reflect their present reality.
Alliant is hardly alone. According to the National Credit Union Administration, in 2024, there were 7,000 common bond expansions, which add new groups based on occupational, associational or geographic areas to expand credit union membership. That’s an astonishing number for financial institutions that maintain a tax exemption solely because of their statutory mission to serve individuals of modest means.
In addition to expanding their memberships, credit unions have also broadened their mandate through substantial mergers and acquisitions. According to American Banker, a record 22 credit union-bank mergers occurred in 2024. Consider Frontier Credit Union, a $700-million institution in Idaho, purchasing First Citizens Bank, worth $75 million and based in Montana. Or MidFlorida Credit Union, worth $8.1 billion, buying Prime Meridian Bank, worth nearly $1 billion. With these acquisitions, credit unions are abusing an uneven playing field and growing exponentially in size.
This recent news has sparked significant attention and even criticism from within the credit union industry. The former chairman of the National Credit Union Administration, Todd Harper, has recently been an outspoken critic of the institutions he once regulated. In a recent interview, Harper stated, “Why would you think credit unions who are nonprofits targeting people of modest means would be doing, in the case of the largest credit union versus one of the largest banks, 25 times as much overdraft per their member?” Credit unions are raking in cash while being subsidized by taxpayers.
Congress needs to take a closer look and exercise oversight by examining whether it makes sense to maintain tax breaks designed for an idea that no longer matches reality.
The upside for taxpayers would be ending a subsidy that amounts to $30 billion over the next 10 years. The benefits go beyond mere cost savings.
A key principle of a sound tax system is fairness. One way to measure tax fairness is whether similarly situated businesses are treated the same. Banks and credit unions that compete for the same customers and offer the same services, in other words, ought to pay the same taxes. When fairness is not a priority, it both distorts the market and encourages widespread lobbying by others who hope to get special carve-outs. That’s why a simple and fair tax system is best for all.
These institutions have grown beyond their humble beginnings, and Congress now has an opportunity to restore fairness to the system. One way to get the ball rolling is for tax writers and the House Oversight Committee to open an investigation.
Lawmakers seeking to fund their tax reform efforts would be wise to look first at cases like this, where revenue-raising and essential principles such as tax code fairness are pointing in the same direction.
