Utah Credit Union Tax Bill Expected to Be Copied Elsewhere
Utah's largest credit unions would have to pay taxes under a bill introduced last week.
The bill, which is supported by the state's banking industry, targets all state-chartered credit unions with assets topping $100 million and offices in more than one county. It proposes that they be required to pay a so-called competitive equity tax - a 30% levy on net income, equivalent to the federal income tax paid by banks - if they wanted to continue operating in more than one county or offering commercial loans.
They would also be barred from merging with other credit unions unless they paid the tax. Those choosing not to pay the tax would still be hit with Utah's 5% franchise tax under the bill, sponsored by Republican Rep. Jeffrey Alexander.
Credit union officials said they expect similar action in other states across the country, many of which are dealing with budget shortfalls. The Florida Bankers Association is already preparing a report that purports to show the financial advantages the tax exemption provides credit unions over banks and the potential for raising new revenues for state governments.
Rep. Alexander said that the bill, as written, would apply to three credit unions and cost them a combined $2 million a year. The three - America First Credit Union, Mountain America Credit Union, and Goldenwest Credit Union - are the only ones to survive with their multicounty branch network intact after a 1999 bill repealed a provision in the state charter that allowed credit unions to expand into numerous counties. The three were grandfathered in the legislation.
Utah's budget deficit is estimated at $150 million for the fiscal year, but Rep. Alexander denied his motive was to narrow the budget gap. "We're aiming to create greater equity, not only between the credit unions and banks, but between large credit unions, that appear to be more like banks, and small credit unions," he said.
Rep. Alexander said he devised the proposal with the help of the Utah Bankers Association and that he also discussed it with some credit union representatives. He did not name the representatives but insisted that they were behind the measure, and he said he did not discuss the matter with the Utah Credit Union League, the chief credit union lobby.
Scott Earl, the league's president, said of Rep. Alexander: "We tried on several occasions to meet with him, but he never did meet with us. Now he's running a major piece of legislation and we weren't even given a courtesy of a meeting or even seeing the bill before it was introduced."