Federal credit unions in Washington have clashed with the District of Columbia government over the industry's most sacred issue: taxation.

To help balance its 1994 budget, the district is imposing a "public safety fee" on all businesses. The amount owed is based on gross receipts.

Seen as Income Tax

The D.C. Credit Union League is fighting the fee, arguing that it qualifies as a tax on income. The league represents 91 federally chartered credit unions in the district, with $2.5 billion in assets.

The trade group also enlisted the forces of the industry's federal regulator, prodding the National Credit Union Administration to issue a legal opinion July 11 backing its position.

Maria Arnold. spokeswoman for the D.C. league, said she didn't know whether any credit unions had paid the fees, which were due July 15,

"We figured we should be exempt because in effect it's a tax on income," she said.

Federally chartered credit unions are exempted by law from all taxation, except property taxes.

But Start Jackson, an adviser in the district office of finance and revenue, said the only way to escape the fee is to request a ruling from the district.

The league has not asked, and doesn't plan to ask, for such a ruling, Ms. Arnold said. The league asked the NCUA for its legal opinion, then sent it to the district government and its member credit Unions.

But Mr. Jackson said: "Anybody we have deemed to be a fee payer, we will be pursuing for compliance."

'Take-No-Action Route'

The president of a credit union for federal employees hinted that at least a large number of credit unions haven't paid.

"We're standing with the rest Of the community in indicating we're going to follow the take-no-action route," said the president, who asked not to be identified.

The NCUA admitted that its opinion is not "automatically binding on the District of Columbia." Credit unions that want to challenge the D.C. government should consult private lawyers, NCUA said.

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