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What major advantage exactly does being tax-exempt offer a Credit Union? A bank pays taxes on profits, sure, but a credit union doesn't have profits, so they st
by ensignavenger 11y ago
What major advantage exactly does being tax-exempt offer a Credit Union? A bank pays taxes on profits, sure, but a credit union doesn't have profits, so they still wouldn't pay much income tax (no income to tax) even if they weren't tax exempt! They may have to pay more property tax (not sure if they are exempt from that or not) or other taxes, but surely a well ran credit union would not have a significant tax burden if it were not tax exempt. (Paper work might be an issue... but banks and credit unions alike have to do plenty of that anyway!)
- rayiner 11y ago> A bank pays taxes on profits, sure, but a credit union doesn't have profits A credit union doesn't have "profits" because it is tax-exempt. Like banks they can, and do, run surpluses, which they return to members in the form of above-market interest rates on deposits or as dividends. If they lost tax-exempt status, they would have to pay taxes on the surplus before returning it to members, like banks do on profits before returning it to shareholders.
- dragonwriter 11y ago> A credit union doesn't have "profits" because it is tax-exempt. They can, and do, run surpluses, which they return to members in the form of above-market interest rates on deposits or as dividends. Interest paid is tax deductible for banks, and dividends paid to demand deposit accounts (the way most credit unions distribute them) are deductible for mutual savings banks (the banks most similar credit unions without tax exempt status), so this tax treatment isn't as special as it seems.