Washington Credit Unions Will Pay First-of-Its-Kind Bank Acquisition Tax

Washington lawmakers approved the new tax last year as part of a legislative package aimed at a $16 billion shortfall in the state's operating budget. The budget solution includes $5 billion in program cuts and approximately $9 billion in new revenue over the next six years, according to Gordon Thomas Honeywell Government Relations firm in Tacoma.  

Trade groups such as the Independent Community Bankers of America (ICBA) have long opposed credit union bank acquisitions. The ICBA argued that the deals result in a permanent loss of federal and state tax revenue when acquired bank assets become tax-exempt. The trade organization continues to lobby Congress to eliminate the federal tax exemption for credit unions managing more than $1 billion in assets.  

"Community Bankers of Washington supports the legislature's recognition of lost revenue when a tax-exempt credit union acquires a taxpaying community bank," Community Bankers of Washington President/CEO Kathryn Swenson said. "Washington families and businesses are already absorbing $4.3 billion in new taxes this year; they shouldn't also be responsible for subsidizing credit unions. This legislation marks an important step toward consistent regulation across Washington's financial services industry." 

Community Bankers of Washington noted that in 2024, 25% of all credit union acquisitions of community banks in the country happened in Washington State, driven, in part, by credit unions' nonprofit and tax-exempt status.  

Of the 22 credit union-bank purchase deals that were publicly announced in 2024, six have been completed by Washington credit unions. In contrast, no bank acquisitions by Washington credit unions were publicly announced in 2025. 

"Washington's credit unions contributed $4 billion and supported 27,200 jobs in the Washington economy; it's no wonder 5.5 million consumers have chosen a credit union as their financial services partner," GoWest Credit Union Association said. "Credit unions remain focused on meeting the needs of members and communities and on filling gaps in access when banks leave. We value continued engagement and discussion during the legislative session and look forward to building on the strong reputation credit unions have earned across the state through consistent community service and local impact." 

Nevertheless, state leagues and the national trade association, America's Credit Unions, (AmCU) have continuously lobbied state and federal lawmakers to protect the credit union tax exemption.  

Last March, AmCU released a commissioned independent study by Dr. Robert Feinberg of American University and Dr. Douglas Meade of Interindustry Economic Research Fund Inc., which details the economic benefits of the credit union tax exemption to consumers and the economy.  

While the Tax Foundation has estimated that credit unions avoid paying $4 billion in annual federal taxes because of their exemption, AmCU's study suggested removing the credit union tax exemption would cost the federal government $33 billion in lost income tax revenue over the next 10 years.  

"GDP would be reduced by $266 billion, and 822,000 jobs would be lost over the next decade as well," the researchers wrote. "The benefit of better credit union loan and deposit rates extends to bank customers as well, due to increased competition. A 50% reduction in the credit union market share would cost bank customers an estimated $11.9 billion to $22.8 billion per year in higher loan rates and lower deposit rates."  

Peter Strozniak can be reached at peter.strozniak@arc-network.com.