Why South Carolina should kill this bill to change where your tax dollars are deposited | Opinion

Congress established credit unions more than 90 years ago to provide basic consumer financial services to those of modest means. Credit unions range in size from small, volunteer operations to large entities. They are financial cooperatives, owned and operated by their members.

In light of their mission and not-for-profit structure, Congress exempted credit unions from federal and state income taxes and limited their activities. Today, there are 47 credit unions doing business in South Carolina. Most have stuck to their original mission.

However, there are nine large South Carolina-based credit unions that have over $1 billion in assets each, which are using their nonprofit status and tax subsidy to become highly profitable, expanding well beyond their intended mission.

Now they are seeking to change South Carolina’s laws to allow them to accept public deposits, giving them an opportunity to make even more tax-exempt revenue.

The South Carolina banking industry is adamantly opposed to any legislation that further subsidizes the net income of these nine large credit unions.

How does taking deposits generated from taxpayers to benefit non-taxpaying financial institutions make sense? How does accepting government deposits square with credit unions’ mission of providing services to those of modest means? It doesn’t.

Let’s look at the facts:

The state’s nine biggest credit unions collectively had a net income of $184 million in 2024, but didn’t pay a cent of state or federal income taxes — unlike most other businesses that make a profit.

The banking industry as a whole paid over $55 million in taxes to the South Carolina General Fund in 2023-24, according to South Carolina’s Comptroller General. Banks are one of the largest corporate contributors to state revenue every year.

These nine credit unions indicate they invest in their communities. How does anyone know? Banks are required to report their community support in compliance with the Community Reinvestment Act — but credit unions are not.

Last year, South Carolina enacted a law through a one-year budget proviso that would allow a credit union to accept municipal deposits (such as those from local or county governments) if it opened an office or had an existing office in any rural town with fewer than 5,000 residents that did not have a bank branch within 10 miles.

Now, credit unions have formed the Palmetto Public Deposits Coalition to get the business of much larger municipalities and metropolitan areas that don’t have any banking access problem without opening any of the branches that last year’s law addressed.

All banks doing business in South Carolina work hard to serve their communities and use deposits as raw materials to make loans in the communities they serve. There are 1,138 bank branches across the state compared with 341 credit union branches.

Yet when you look at a map of these branches, every single rural area where there is a credit union branch, there is a bank branch. And there are dozens of rural areas where there is a bank branch but no credit union. If these credit unions truly wanted to help more people of modest means, wouldn’t they open new locations in these rural areas?

House bill H. 3221 and Senate bill S. 60 have been introduced in the General Assembly to benefit these nine large credit unions. Elected officials should ask why they should be given expanded powers to become even more profitable after making $184 million in profits last year and paying nothing in state income taxes.

And all taxpayers should be offended by this special interest legislation.