Anti-CU Resolution Sent to Congress

Register now

A two-year study by a specially appointed task force on the credit union-bank wars here wound up where it began, with the panel approving a resolution last week seeking to tax credit unions, this time asking Congress to allow states to tax federally chartered credit unions.

The non-binding, joint resolution must still be approved by the state legislature-but not by the state's new governor, the pro-credit union Jon Huntsman, according to State Rep. Jeff Alexander, the co-chairman of the Financial Institutions Task Force, who lost a 2002 battle to impose a state tax on the largest credit unions. That battle forced almost all of the largest state chartered credit unions-including giants America First CU and Mountain America CU-to flee to the tax-exempt shelter of the federal charter, rendering Alexander's tax initiative moot.

As a result, Alexander and his legislative allies, backed by the state's powerful banking lobby, have decided to take their initiative to Congress-if members of the state House and Senate agree.

"We're asking Congress to give us some justification as to why they (credit unions) are exempt (from state sales and other taxes)," Alexander said last week after the panel's seven-to-four vote in favor of the broad resolution.

Scott Simpson, president of the Utah League of CUs, said he was disappointed in the resolution but expected its outcome. "The outcome of this task force was preordained-so here we go again," said Simpson, about the long-running legislative battle with the banking lobby that has extended from taxation to field of membership to ATMs and back to taxation. He lamented that credit unions were never asked to testify before the task force.

The anti-credit union resolution is broad in its wording, asking Congress to investigate NCUA's rulemaking authority, particularly with respect to the federal regulator's 2002 approval of broad community charters for a half-dozen Utah credit unions, allowing them to escape the tax ploy by Alexander and other Utah lawmakers. Those community charters are currently being challenged in federal court by the Utah Bankers Association.

The conversion of the large Utah credit unions to federal charters shielded them from state sales taxes and supervisory fees assessed by the Utah Department of Financial Institutions, depriving the state of several-million dollars in revenues.

Utah lawmakers were so distraught at the escape of the credit unions to federal charter and the loss of state revenues that they lobbied the National Association of State Legislatures to call on Congress to end the exemption of federal credit unions for state levies. But that bid was unsuccessful, as well.

Resolution Calls For CU Categories

The resolution also urges Congress to create categories, such as those contemplated by Utah lawmakers, of "exempt" and "non-exempt" credit unions, the exempt credit unions being the largest ones which would be subject to taxation.

This time, Utah's credit union foes are hoping for what they admit is a long shot, to enlist the help of Utah's congressional delegation, including influential senators Orrin Hatch and Robert Bennett, and the state's three House members in their effort to rein in credit unions.

Even Alexander conceded the odds are against their initiative, even if the resolution is passed by the state's lawmakers. "We want them to develop an appetite for this," he said.

Simpson, the former director of the Utah Republican Party, which controls both the House, Senate and the governor's office, was confident the congressional delegation has little interest in the anti-credit union initiative, even if it passes the state legislature.

"I've sat down with all of them at one time or another and they have no appetite for this," said Simpson, a former top aide to Hatch, as well.

For reprint and licensing requests for this article, click here.