Texas Bankers Try To Divide, Then ConquerOn CU Taxes

AUSTIN, Texas - (03/22/05) -- The Texas Bankers Association willemploy a new strategy to try to chip away at the credit unionexemption from the state's business taxes when the tax reform billpassed by the House last week moves over to the Senate. In astrategy being crafted at the national level--by the AmericanBankers Association--the TBA will try to convince state senatorsthey should consider ending the exemption for diversified,multi-service credit unions, or 'de facto' banks, according to JohnHeasley, executive vice president of the state trade group. "Wecontinue to advocate to tax-writers that there should be adistinction drawn," Heasley told The Credit Union Journal. Heasleysaid they hope to incorporate a scheme advocated by the ABA anddebated in the Utah legislature where the bank lobby tried todivide the state's credit unions into two groups: traditionalinstitutions serving a restricted membership base with limitedservice offerings which would continue to be tax-exempt; and thosecredit unions with open community charters that provide abroad-range of financial services traditionally offered by banks,like small business loans, trust and insurance services. Thoseinstitutions would be subjected to taxation. "For those creditunions that are de facto banks, we believe they should be taxedlike commercial banks," said Heasley, acknowledging that twodiversified Texas credit union giants, Community CU and OmniAmercanCU, are abandoning their credit union exemption in favor of bankcharters. The House last week approved a new tax bill givingbusinesses the option of paying the state's franchise tax or a newtax on payrolls, and agreed to retain an exemption for creditunions from either tax.