The U.S. Capitol rotunda in Washington. Credit: Diego M. Radzinschi/ALM

The House Ways and Means Committee has advanced a sweeping budget reconciliation bill that, while largely focused on extending provisions of the 2017 Tax Cuts and Jobs Act (TCJA), included several elements that could significantly impact credit unions, their members and the financial services landscape.

Most notably for credit unions, the legislation left intact their longstanding federal tax exemption, a critical outcome for the not-for-profit, member-owned institutions. The credit union industry had raised alarms over the potential for erosion of their tax treatment as Congress revisited expiring TCJA provisions. America’s Credit Unions and the Defense Credit Union Council (DCUC) both praised the Committee’s decision to preserve the exemption, calling it a win for the more than 142 million Americans who rely on credit unions for affordable financial services.

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Beyond the preservation of tax status, several provisions in the legislation could affect credit union operations and their members:

  • Qualified Business Income Deduction: The bill would make the TCJA’s 20% deduction for pass-through income permanent and increase it to 23%. This could benefit certain CUSOs, depending on their corporate structure and eligibility under Section 199A.
  • Estate and Gift Tax Exemption: The bill would extend the increased exemption amount to $15 million, which could influence wealth management offerings at larger credit unions and support estate planning services for high-net-worth members.
  • Savers Credit and Retirement Enhancements: Provisions supporting ABLE accounts and workplace retirement savings could align with credit unions’ financial wellness and planning initiatives, particularly for underserved communities and individuals with disabilities.
  • New Deductions for Overtime and Tip Income: Workers who earn overtime or rely on tips would be eligible for tax deductions, potentially improving the financial standing of many lower-income credit union members and increasing demand for savings tools and credit products.
  • Itemized Deduction Cap: The bill proposed to cap the tax benefit of itemized deductions, including those for mortgage interest and charitable contributions — two areas often linked to credit union lending and community support programs.

As the reconciliation process continues, credit union advocates plan to stay engaged. “This legislation contains numerous provisions that intersect with our mission of member service and financial inclusion,” DCUC President/CEO Anthony Hernandez said. “We’ll continue working to ensure credit unions are protected and positioned to thrive.”

The bill now moves to the House Budget Committee for inclusion in a broader reconciliation package.

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Michael Ogden

Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.