Credit union member-owners pay personal income taxes on interest and dividend income from their credit union. In fact, when it comes to Federal corporate and personal income taxes, credit unions are taxed identically to one-third of all U.S. banks, those established under Federal law as “Subchapter S” corporations.
Let's fact check this statement for accuracy.
Mr. Gibardi is correct that credit union members pay personal income taxes on interest and dividend income from their credit union; however, he is incorrect to state that credit unions are taxed identically to banks established as Subchapter S corporations.
With a Subchapter S corporation, income and losses of the business are passed through to shareholders and included on their individual tax returns. This allows Subchapter S corporations to avoid double taxation on the corporate income. As a result, there's just one level of federal tax to pay instead of two.
In comparison, the net income of a credit union goes untaxed at both the corporate level and the personal level. In other words, there is not any level of federal taxes paid on credit union net income.
If credit unions were taxed identically to a Subchapter S corporation, then the credit union members would have to pay personal income taxes on the net income of the credit union. This is not the case.
It is obvious that his statement that credit unions are taxed identically to Subchapter S banks has a significant factual error and deserves a rating of several Pinocchio noses.
Read the opinion piece.
