Charles Sauer, President of the Market Institute, recently published an important article in Townhall highlighting the need for Congress to revisit federal credit unions’ nonprofit status. As Sauer explains, what was once a system designed to serve low-income communities has morphed into billion-dollar institutions that look and act just like banks—only without the same transparency or tax burden.
“When most people think of nonprofits, they often envision charitable organizations like the American Red Cross or the Salvation Army, hospitals and churches, or maybe even think tanks like the Market Institute. Now, imagine discovering that instead of furthering the public welfare, a nonprofit was slapping their name on a sports stadium or figuring out new ways to churn even more ‘profit.’”
Unlike traditional nonprofits, federal credit unions are not required to file Form 990, the annual disclosure that shows executive compensation, lobbying, and other financials. Churches and religious groups are also exempt, but as Sauer notes, the idea that large financial institutions with billions under management should get the same exemption is indefensible.
“Many credit unions are now operating more like the largest banks in the country, and less like nonprofits. The solution to this problem is two-fold: the IRS should require them to file a Form 990, just like other nonprofits, and Congress should utilize its oversight powers to hold hearings that reexamine their tax exemption.”
The last congressional hearing on this issue took place in 2005. Since then, Navy Federal Credit Union alone has ballooned from $24 billion in assets to more than $190 billion today—putting it on par with some of the largest banks in America.
At the same time, credit unions have begun pouring money into high-profile marketing, like stadium naming rights. Sauer highlights several examples, from the Washington Commanders to Florida Atlantic University. And while state-chartered credit unions must file 990s—which reveal executives earning salaries in the multi-millions—federal credit unions keep that information hidden.
“Sound Credit Union’s CEO made just over $4 million, Achieva Credit Union’s CEO made over $5 million, Wings Financial Credit Union’s CEO made just under $10 million, and FAIRWINDS’ CEO raked in nearly $11 million. Keep in mind that these are executives of ‘nonprofits.’ These CEOs likely deserve these high salaries, but federal taxpayers shouldn’t be footing the bill for their salaries.”
Sauer concludes with a simple principle: if do-good charities like St. Jude’s have to disclose their books, then so should financial giants operating under the nonprofit banner. And if banks pay taxes, then credit unions should too.
“Credit unions are not the same mom and pop nonprofits they once were – helping the unbanked get a start. It’s time for Congress to pull back the curtain and take these salaries off the backs of taxpayers.”
