Tax Resolution Opposed In TV Spots

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After some heated wrangling between credit union and bank allies, the state House last week approved a non-binding resolution calling on Congress to help them tax credit unions.

The measure, known as House Resolution 1, now goes to the Senate for its approval.

The resolution, initiated by lawmakers angered over the 2003 escape of Utah's largest credit unions from a bank-backed tax trap, urges Congress to weigh into the decade-old credit union-bank wars by, among other things, lifting the exemption from state taxes for federally chartered credit unions. That issue became the focus of the credit union-bank fight when a 2003 proposal to tax Utah's largest state-chartered credit unions was neutered when as many as a dozen of the largest state charters converted to the tax-exempt shield of the federal charter. A task force appointed by the legislature decided to ask Congress to close that loophole by allowing them to apply state sales and other levies on federally chartered credit unions.

The political struggle between the two powerful lobbies-more than half of Utahans are said to be credit union members-heated up around last week's vote. The Utah League of CUs spent $50,000 on a TV and radio ad campaign rousing up opposition to the proposal and thousands of credit union members either writing or e-mailing their representatives to urge a "no" vote just prior to the vote.

Even if the resolution passes the state Senate and gets sent to Washington, as its supporters hope, there is little chance it will see action in Congress, which has little enthusiasm for getting involved in credit union-bank wars. Even representatives of Utah's congressional delegation have said privately they have no intention on acting on the initiative.

Last week's approval by the House, on a 41-to-34 vote, came after the lawmaker first removed precedent-setting language that would create two different classes of credit unions-small, traditional credit unions that would be exempt from bank-like rules and taxes, and large, diversified credit unions that would be non-exempt. The credit union lobby was happy with the removal of the language, as it would have split the credit union movement in two for the first time, something the bankers have been seeking to do for many years. But the distinction between the two classes of credit unions was later added back in to the resolution and included in the final version.

Scott Simpson, president of the Utah league, said he was disappointed in the proceedings and thought both lawmakers and the public have become weary of the battles between the credit unions and banks.

"The one thing that is abundantly clear is that folks want this thing to go away," said Simpson.

The debate on the resolution now shifts to the Senate, where the credit union lobby hopes to put it to rest. "We hope it dies in the Senate. That's the hope from here," said Simpson.

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