A bill that would apply a franchise tax on the state's largest credit unions appeared dead last week when Senate Republican leaders agreed to bury the tax proposal.
Republican leaders, adverse to any new taxes, agreed during a party caucus last week not to bring the bill up this session, effectively killing the proposal, despite the support from the powerful state banking lobby.
Pat Jury, chief lobbyist for the Iowa CU League, who was notified of the decision by the Senate Majority Leader, was still guarded because of the possibility that lawmakers supporting the banks could plot some maneuver to revive the bill. "Nothing's over by any stretch of the imagination," he said. "There's still four or five weeks left in the session."
But the Iowa Bankers Association, which helped draft the bill, see the chances of the bill as negligible now, even though a separate version is still alive in the House. "We certainly aren't going to back off," said Sharon Presnall, lobbyist for the IBA, conceding the chances of the tax bill are greatly diminished by the Senate leaders' decision. She said they will continue to work with House sponsors to try to move the tax initiative, possibly as an amendment to some other legislation.
The decision by the Senate leadership follows the failure of the credit unions and banks to arrive at a compromise directed by the legislators. The Iowa league had proposed a measure that would require any credit union acquiring a bank-a proposal that spurred the tax fight-to pay state franchise taxes on the banking operations. But the bakers would not back off on their tax proposal, proposing that large CUs voluntarily reign in much of their activity in business lending, branching and field of membership expansion in order to avoid the proposed franchise tax.
Jury said he expects the tax on a bank acquisition, prompted by the unsuccessful bid by University of Iowa Community CU to buy Hawkeye State Bank, to be passed in some form during the legislature.
The tax bill, which passed the commerce committees in both the Senate and House, would apply the state's 5% franchise tax to state chartered credit unions over $100 million in assets and operating in multiple counties. As written, it would cost six credit unions; John Deere Community CU, Waterloo; Collins CU, Cedar Rapids; University of Iowa CU, Iowa City; Du Trac Community CU, Dubuque; and Greater Iowa CU, Ames, as much as $1.4 million a year in franchise taxes.
After its introduction the Iowa league organized a statewide lobby against the bill, bringing more than 1,000 credit union loyalists to for a rare rally inside the Capitol last month.
Iowa is one of just five states that already taxes credit unions, assessing a 0.5% 'Monies and Credit Tax' on legal and special reserves held by the state's 176 state charters.