Utah Legislature Sends Anti-CU Resolution
This state's legislature expressed its frustration last week at its failed efforts to tax credit unions and asked Congress to step into the fray.
In a non-binding resolution sent to Washington, the legislature asked Congress to allow states to tax federally chartered credit unions. The request comes two years after the state's largest credit unions dodged the legislature's efforts to tax state-chartered credit unions by converting to the tax-free shield of the federal charter, depriving state coffers of millions of dollars in state sales tax revenues and leaving advocates of the state credit union tax with egg on their faces.
The anti-credit union resolution passed the state Senate by a 12-to-5 vote, after passing the House two weeks before on a 41-to-34 tally.
But the meaning of the latest tax-bid, which will be sent to the state's two U.S. senators, three U.S. congressmen, the Speaker of the House and the President of the Senate, is dubious, in light of comments made by Utah's Sen. Robert Bennett to The Credit Union Journal two weeks ago. Bennett told The Credit Union Journal there is very little interest in Congress to wade back into the bank-credit union wars, as it did just a few years ago during the fight over HR 1151. "There's no appetite to re-open it," said Bennett, himself a scion of a well-known banking family in Utah.
Still, credit unions in Utah saw the passage of the resolution as a dangerous precedent, one that could spur debate in Congress, even if no action is taken. "We're fighting this because of the momentum it could cause, not because of the immediate impact of the resolution," said Scott Simpson, president of the Utah League of CUs. "The banking lobby has gone to great effort to get a toehold (on the national debate); but I'm not sure it's going to make a difference."
But the hope of the Utah bankers, which have been pushing the anti-credit union fight in the legislature for several years, the resolution could encourage national discussion on the nature of credit unions, especially the growing number of large diversified institutions-as the number of billion-dollar credit unions nears 100, including two in Utah.
The Utah resolution also asks Congress, just like the Utah legislature discussed, to separate the credit union movement for the first time into two types-small, traditional mom-and-pop credit unions; and large, diversified credit unions that the bankers argue are no longer worthy of the tax exemption.
"The banking industry supports the credit union tax exemption, we are simply focused on those very large institutions that are no longer operating like credit unions," said Howard Headlee, president of the Utah Bankers Association. "Nobody here wants to tax real credit unions, but if Congress will focus on the real issue, we are confident they will come to the same conclusion as our legislature."
Despite its non-binding nature, the resolution was again the focus of an expensive lobbying and public relations campaign waged between the credit union and bank lobbies. The Utah league financed radio and print ads and staged a write-in campaign to lawmakers urging the defeat of the motion. A petition drive opposing the resolution collected the names of more than 100,000 credit union members on it and will be sent to the same members of Congress who get the anti-credit union resolution.
The bid to get Congress involved follows the 2003 efforts by banks to get the state legislature to differentiate between small credit unions, which would be known as 'exempt' and large credit unions, which would be 'non-exempt' from state taxes. But just as that debate was heating up the state's thee largest credit unions, America First CU, Mountain America CU and Goldenwest CU, fled the state chartering system and took with them millions of dollars in state sales taxes and supervisory fees that helped finance the state's Department of Financial Institutions. Since then another 10 large state charters have fled the state system for the tax-exempt shield of the federal charter, depriving the state of millions more in sales tax revenues.
The result of the 2003 legislative initiative was a task force to study the issue, which resulted in the drafting of the anti-credit union resolution.
Besides the tax issue and the differentiation of small and large credit unions, the resolution calls on Congress to reorganize NCUA and review the federal regulator's field of membership policies, which the Utah bankers successfully overturned in a court battle last year.