Kansas credit unions prevail in latest state-level tax fight

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Kansas credit unions are claiming victory after two bills that would change the tax status for some financial institutions failed to make it through a committee in the state Senate.

On Oct. 3, the Senate's Special Committee on Financial Institutions and Insurance met to consider Senate Bill 238 — which would decrease the privilege tax, a state income tax banks pay — and SB 239, which would tax credit unions with $100 million or more in assets. Both bills were reportedly written and endorsed by the Kansas Bankers Association.

On Tuesday, the 11-member committee voted to “not recommend” SB 239, and decided to make “no recommendation” on SB 238. Instead, the Kansas Legislative Research Department staff will continue to gather data on the topic.

Stephanie Mullholland, director of Kansas legislative and political affairs at the Heartland Credit Union Association, said lawmakers’ decision on the credit union taxation bill was a win for the industry.

“The bottom line is this: the banks want a double standard,” she said in a statement. “They want a special loophole created so they can be taxed like not-for-profits without having to play by the same rules as not-for-profits. Legislators and taxpayers can see right through that.”

Mullholland was among those to testify at the hearing earlier this month. Her remarks focused primarily on economic factors, including that banks control 99% of the commercial market in the Sunflower State.

“Credit unions may only account for 1% of the commercial market, but that often includes small businesses and farmers that banks weren’t willing to take a chance on,” Mullholland said Tuesday. “What the big banks are really saying is that 99% isn’t enough for them. Any reasonable person can see that neither of these bills stand to benefit consumers, but certainly stand to benefit banks and their shareholders.”

The Heartland Credit Union Association also argued that Kansas has lost 244 credit union charters in the past five decades, declining from 322 credit unions in 1969 to 78 credit unions today.

“The fact is this is the beginning, not the end, of this important policy discussion in Kansas," KBA President and CEO Doug Wareham said in an email to Credit Union Journal, adding, “We now have both in-state and out-of-state credit unions competing with tax-paying Kansas banks on multimillion-dollar commercial loans and we are confident the more light we shine on this fact the more momentum we will build for a level playing field.”

Earlier this year, Kansas Gov. Laura Kelly signed into law legislation modernizing the state's credit union statute.

The battle in Kansas is just the latest attempt by bankers to impose taxes or restrictions on credit unions. In February, the Nebraska Banking, Commerce and Insurance Committee considered a bill that would have required state regulators to notify banks whenever a CU applied to expand its field of membership.

In 2018, an effort to tax Iowa credit unions ultimately failed, but two credit unions were forced to change their names to comply with legislation that prohibits Iowa credit unions from using the name of state universities in their own name.

This story was updated at 3:26 P.M. ET on Oct. 30, 2019.

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Tax State taxes Tax exemptions Finance, investment and tax-related legislation Commercial lending Kansas