Fate Of Texas Tax Bill Tied Up In Legislature

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Tax reform legislation making its way through the state Senate last week would apparently retain the credit union exemption from state business taxes, though major disagreements between the Senate and the House have clouded the reform proposal.

A 166-page bill introduced last week in the Senate Finance Committee would tinker with the rates for the state's existing franchise (business) tax but continues to exempt credit unions and a host of other 501(C) 3 not-for-profit organizations, according to Buddy Gill, chief lobbyist for the Texas CU League. "All the entities that are exempt in our (business) franchise tax code now are exempt (in the Senate bill) and that includes us," said Gill.

But infighting over the business tax reform between the two Republican-controlled chambers could doom the tax reform bill for this year, as the clock is running out on the May 31 scheduled expiration of the annual legislative session. "The House has no interest in this bill," said Gill, of the lower chamber, which passed its own reform bill last month. That bill would give all businesses, except for CUs and other exempt entities, the choice of paying the franchise tax or payroll tax.

With the clock ticking on this year's legislative session, several scenarios remain for the tax reform. One is that the Senate passes a bill, perhaps as soon as this week, then works with House leaders to reconcile it with the different version passed by the House last month.

Another scenario is that the two chambers fail to come to agreement on a reform and the Governor decides to schedule a special session of the legislature to deal with the tax reform.

Either way, the credit union lobby is confident they will be protected in the Senate bill, as they were in the House's bill. "Lt. Gov. (David) Dewhurst has made it clear that he is a strong supporter of our tax exemption and he will do everything he can to protect us," said Gill, noting that the lieutenant governor in Texas is also the presiding officer of the Senate, so he wields considerable power over legislative and other matters.

A third scenario, according to Gill, is that lawmakers fail to come to agreement and end the session without reforming the state's business tax system. While this succeeds in preserving the CU exemption, it would probably mean that the issue resurfaces next year.

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