As Congress revisits tax policies, the familiar refrain of banks attacking the tax-exempt status of credit unions has resurfaced. Banks claim that credit unions enjoy an unfair advantage, but these critiques conveniently ignore banks’ own exploitation of tax benefits. Behind their rhetoric, many banks actively utilize provisions of the Internal Revenue Code to sidestep paying their fair share of federal income taxes. This hypocrisy not only undermines their argument but also underscores the critical role credit unions play in fostering community development. Let’s break down the facts.
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Banks’ Tax Strategies: Subchapter S and Depreciation

One of the primary ways banks sidestep federal taxes is through Subchapter S of the Internal Revenue Code. This provision allows qualifying banks to function as pass-through entities, avoiding federal corporate income taxes by distributing income directly to shareholders, who then pay individual taxes. Over 2,000 U.S. banks elect this status, collectively saving billions in federal taxes annually (Source: Institute on Taxation and Economic Policy, 2023). In 2022 alone, Subchapter S banks saved an estimated $1.8 billion in federal income taxes (Source: American Bankers Association, 2022).