Ariz. Legislator Says CUs Must Compromise Or Face Loss Of Tax Exemption

Register now

The powerful state senator who stands in the way of a credit union-backed bill that would allow boards to expand their fields of membership without having to apply for approval from the state regulator is raising the specter of CUs losing their tax exemption if they continue to ask for changes to the CU statutes.

Senate Rules Committee Chair Robert Blendu (R-Litchfield) told The Credit Union Journal he is opposed to the CU bill because it is "nothing more than a turf war" between banks and credit unions and "there is no reason to favor one group over the other." He has other objections, as well.

"I tried to point out that they enjoy a certain tax status that the banks don't have, and if credit unions keep asking to get rid of the distinctions that make them different from banks, the more they become like banks. Well, it's a case of be careful what you wish for because they could lose their tax status," Blendu said, following meetings he had with bank and CU representatives. "I think the key here is that if we don't do anything with this legislation this session, nothing bad would happen. We have a lot more important things we have to get done."

Moreover, Blendu criticized the credit unions for being unwilling to make any compromises.

"Here's where we are now. They can define their membership as an entire county-even Maricopa County, which is bigger than some states in this nation-or even the entire state, so they can throw out a pretty big net as it is," he explained. "When this first started, credit unions said they were upset because their customers don't have the right to refer a friend. Well, I suggested we have a bill that takes care of what they said they wanted initially, to allow their customers to be able to refer a friend, but they wouldn't agree to do that. Here's a bill that helps only them and nobody else, and they're not even willing to compromise."

As for the CU argument that their democratic structure is the reason CUs are "exempt from certain taxes, Blendu responded, "Look, the same could be said of Bank of America. They have a board of directors who are elected by the shareholders."

Blendu conceded there are some CU/bank differences in how directors are elected.

Still, the senator insisted credit unions could be putting their coveted tax exemption at risk. "I can only say that there are distinctions that make credit unions stand out from banks, and the more of those that you give up, the more bank- like you become, and at that point, your tax exemption is called into question," he said. "I'm a stock broker, and I have accounts with a credit union as well as with a number of banks. The fact is, both banks and credit unions want to get into my business, and you don't see me whining about it."

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