Calif. CUL Aims To Halt Bill 'In Its Tracks'

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The California Credit Union League is urging credit union leaders and members in the state to write the state's Assembly Banking Committee and "halt in its tracks" AB 1226, a bill by Assemblywoman Cindy Montanez that calls for a study of the feasibility of imposing a "fee" on California's state and federally chartered credit unions.

"Assemblywoman Montanez's legislative director had previously told league staff as well as the national credit union trade press that they had no intention of attacking credit unions' tax-exempt status. Despite those assurances, the assemblywoman is apparently bringing her bill forward to the Assembly Banking Committee on April 21 unchanged," said David L. Chatfield, league president and CEO. "We have also learned that Assemblywoman Montanez intends to add harsh language to her bill that would misrepresent the activities and motivation of state and federal credit unions. We believe the assemblywoman's office has not honored its assurances to us, and all credit union supporters should request, in the strongest possible terms, that the committee halt in its tracks this banker-inspired attempt to harass California's credit unions and their more than nine-million members."

Under AB 1226, the Legislative Analyst's Office would report, by Jan. 1, 2005, on the feasibility of imposing a "fee" on California's state and federally chartered credit unions that have assets of $1-billion or more, offer commercial loan products and commercial loan services to businesses, and "no longer require a traditional common bond for their members."

Bob Arnould, League vice president, state governmental affairs, pointed out that the bill does not differentiate between credit unions based in California, and credit unions based elsewhere but with a presence in California. The bill asserts merely that "state and federally chartered credit unions accrue great benefits from doing business in California."

"That language makes it appear-and certainly opens the possibility- that this 'study' could result in an attempt to tax not just California-based state and federal credit unions, but out-of-state credit unions, such as Navy Federal Credit Union, that are headquartered elsewhere but which have branches and many members in California," Arnould said.

"There has been no call to revisit this issue from any of the legislators who sponsored the bill to repeal the franchise tax, from the dozens of legislators who supported it, or from the public," Chatfield said. "This benefits only one constituency, and that is the state's banks."

"Moreover," he said, "under federal law, the state has no power to levy taxes against federally chartered credit unions, something the California Bankers Association is well aware of. In its attempt to disguise this tax as a 'fee,' the CBA is purposely trying to sidestep the federal pre-emption of the taxation of federally charted credit unions."

He also noted that there are now 18 banks in California, with more than $5 billion in combined assets, that are free of corporate income taxes because they have converted to Subchapter S corporate tax status.

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