Credit unions here, fresh off a successful campaign to defeat a bank-backed state income tax intitiative, are facing the specter of a new tax fight as members of a state commission on tax reform prepare recommendations for a special fall session of the legislature.
While the credit union lobby easily turned away a legislative proposal to apply the state's income tax to large credit unions over $100 million in assets similar to initiatives in Utah, Iowa and Oregon a new threat has emerged.
The 23-member Blue Ribbon Tax Reform Commission, appointed by Gov. Bill Richardson earlier this year, is exploring a proposal that would repeal the exemption for state-chartered credit unions from the gross receipts, or sales, tax. Such a proposal, supported by the banking lobby, would apply the state's 5.85% tax on the purchase by state -chartered credit unions of new equipment and furnishings, as well as on fees assessed for services such as safety deposit boxes, cashiers checks, and ATM fees.
Wide Cost Estimates
The cost estimates for a new tax on credit unions are all over the place. The Commission has presented estimates of as much as $2 million a year for New Mexico's 26 state-chartered credit unions.
But officials with the New Mexico CU League believe the price tag would be far lower, between $250,000 to $500,000.
just as importantly, according to Christopher Jillson, president of Sandia Laboratory FCU and who just ended his term as chairman of the league, is the costs and manpower required to track such an assessment. "The issue is being able to have the data processing software to track it all," said Jillson. "That 5.85% gets split between the state, the counties and municipalities. You would have to start charging it to your members."
As non-profits, state-chartered credit unions are currently exempt from the gross receipts tax. But a repeal of the exemption for non-profits could net the state tens of millions of dollars in new revenues, including as much as $75 million from Los Alamos National Laboratory, which qualifies as a non-profit because it is owned by the Northern California University System.
"Our problem is, we'll probably be grouped with some of these other non-profits," said Jillson.
Despite the state's fiscal health as one of the few states without a budget deficit, the tax issue is alive in the discussions of the Commission, which is scheduled to make its recommendations by Oct. 1, in time for action by a special legislative session later this year. "Credit unions keep coming up throughout the Commission deliberations," said Tracy Rock, chief lobbyist for the New Mexico league.
But because of the state's strong fiscal condition and the negligible revenue a credit union tax would produce, Rock said she is confident they will prevail in their arguments to the commission.
One other possibility being discussed that has the bankers' ears is a rollback or elimination in their gross receipts taxes to put the banks on equal footing with credit unions, she said.