A bill introduced in Nebraska's Legislature this year that would exempt credit unions from a state financial institutions tax and greatly expand their reach has angered the state's bankers.

"I call it a credit union special-interest bill," said Kurt Yost, executive director of the Nebraska Independent Bankers Association. "And you can be assured it will be vehemently opposed by the entire banking community."

The bill, called a recodification of credit union regulation, includes provisions that typically make bankers' blood boil.

The measure, which like all state bills awaits a public hearing before legislators consider it, seeks several changes for state-chartered credit unions, including an exemption from a financial institutions deposit tax. Credit unions have been subject to the tax since the state implemented it in the 1980s, the trade group said.

The bill also would expand the definition of the "common bond," which defines who can join a credit union.

In addition, the bill would authorize the use of shared credit union facilities, allowing the institutions to provide services to their customers at unlimited locations in the state, Mr. Sedlacek said.

It also would authorize credit unions to establish a new type of deposit account that could allow them to accept public deposits, said Ronald Sedlacek, associate general counsel for the Nebraska Bankers Association. Certain credit unions have been limited to offering share accounts to their members and are prohibited from accepting public deposits.

Steve Edgerton, president of the Nebraska Credit Union League, said all of the measures in the bill are intended to give state-chartered credit unions the same powers that federally chartered credit unions enjoy.

Some people have "painted a picture that we're trying to get away with something," Mr. Edgerton said. "We want to create parity."

The state's bankers lashed out against the proposed legislation.

"I'm appalled," said Alice Dittman, president and chief executive officer of $109 million-asset Cornhusker Bank, who competes with 14 state- chartered credit unions in her home base of Lincoln.

"I see no reason that credit unions who wish to accept as a common bond the fact that they live in an identifiable community or county should be exempt from the financial institutions tax that the rest of us pay," she said.

Ben Norman is particularly against the bill, because his bank, the Crawford branch of $75 million-asset Security Bank, Sidney, already has lost business to Western Heritage Credit Union, which recently underwent a controversial and widely publicized expansion.

Last year, the credit union was authorized to expand from serving railroad employees to serving anyone in Nebraska's western panhandle region, where Security is located.

"There's just an unfair competitive advantage," said Mr. Norman, executive vice president of the bank.

The bankers reeled off unfair advantages such as differences in taxation and examination procedures between banks and credit unions and no community reinvestment act requirements for credit unions.

Credit unions and banks "were set up for two separate purposes," Mr. Norman said. "Now they're trying to change that so they are the same."

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