Some of the wealthiest and most politically powerful people in Nevada are attempting to take advantage of a loophole in the tax code so their commercial bank will never pay taxes again.
A billionaire casino magnate, the son of former Senate Majority Leader Harry Reid, the editor of a local newspaper, and even a former celebrity athlete enjoy cushy positions on the board of directors of tiny Meadows Bank in Las Vegas. The bank is trying to sell itself to Utah-based America First Credit Union, a $22.5 billion financial behemoth with an ace up its sleeve: exemption from most federal, state, and local taxes.
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Federal credit unions are supposed to operate as small, community-focused financial institutions that serve Americans of modest means. In reality, they’re operating on the same playing field as some of America’s largest banks and making multibillion-dollar acquisitions to line their executives’ pockets further. And the worst part? We all have to pick up the tab.
When a credit union acquires a local bank, the combined entity enjoys an incredibly broad exemption from taxation. It often does not even have to pay bank-specific taxes on the state or local level. For example, if the Meadows Bank acquisition is finalized, it may no longer have to pay Nevada’s bank branch excise tax. So, while Nevada families and small businesses would continue to pay taxes, the well-connected elites who formed this bank to serve their business empires in 2008 would be off the hook.
The Trump administration should not approve the America First-Meadows deal or any similar transactions unless they agree to pay taxes, at the very least. Fortunately, President Donald Trump fired two Democrats on the National Credit Union Administration board, so the NCUA lacks a quorum and probably cannot approve acquisitions anyway.
This shady deal exemplifies exactly why hardworking American taxpayers, including those who live paycheck to paycheck, think the economy is rigged to benefit wealthy elites. America First Credit Union, which is the sixth largest credit union in the country, and Meadows Bank want you to believe this deal will “further strengthen [our] ability to provide members with comprehensive business solutions and provide Meadows’ customers with access to a full suite of consumer products and services.” What the bank directors don’t say is that the deal will allow their bank to avoid paying most taxes forever.
This loophole was not envisioned when Congress granted credit unions their tax-exempt status. Federal credit unions were established during the Great Depression as non-profit institutions, allowing underserved populations to access banking services like loans. But things have clearly changed over the years.
Some states have identified the acquisition loophole and decided to enact legislation that closes it. In West Virginia, the state legislature passed a law that prevents financial institutions from acquiring banks unless insured by the Federal Deposit Insurance Corporation, which credit unions are not. Washington State forbids credit unions from acquiring banks unless they pay taxes. Other states may want to follow suit and ensure credit unions pay their fair share.
This Las Vegas backroom bargain is not the first time credit unions have shown where their real priorities lie. Recently, credit unions have been spending millions of dollars of their members’ money on buying naming rights to sports stadiums nationwide. From Northwest Federal Credit Union spending $8 million each year for the naming rights to the Washington Commanders football stadium, to Community America Credit Union putting Kansas City Chiefs quarterback Patrick Mahomes in a Super Bowl ad, it’s clear that federal credit unions are no longer mom-and-pop lenders that need to be subsidized by American taxpayers.
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While during the Great Depression it may have made sense for credit unions to receive some special considerations to stay afloat, times have obviously changed. Credit unions are exempt from paying unrelated business income taxes and don’t have to file IRS Form 990 to disclose expenditures and executive compensation, as other non-profit organizations do.
The bottom line? These elite financial giants are out of control. They have exploited a 1930s-era loophole in the tax code to enrich themselves at our expense, all under the guise of providing their members with “comprehensive business solutions.” The Trump administration and state governments should stop these tax-dodging bank acquisitions and make credit unions start paying taxes like the rest of us.
Ziven Havens is the cofounder of The Bull Moose Project, an advocacy organization focused on competitive markets, responsible stewardship, and community revitalization.