Add Oregon to the growing list of states considering a tax on credit unions.
Outraged that credit unions there are seeking legislation that would permit them to accept municipal deposits, Oregon bankers have retaliated with a bill that would force the state's 10 largest credit unions to pay excise taxes.
The bill, introduced March 15, is at least the fourth of its kind to go before a state legislature. Similar bills are under consideration in Iowa and New Mexico, and another in Utah was defeated - but only after the state's three largest credit unions agreed not to make business loans.
The Oregon tussle began in January, when, at the request of the Credit Union Association of Oregon, lawmakers introduced a bill to allow cities and other government entities, such as school and fire districts, to deposit public funds in either credit unions or banks. Under present law, only banks can accept public funds.
If the measure passes during the current session, expected to end in July, credit unions could start accepting municipal deposits on Jan. 1.
Gene Poitras, the credit union group's president, said the measure was proposed mainly to give public entities in rural areas or small towns - where there may be more credit union branches than bank branches - a convenient option for depositing their funds.
"In a lot of places, credit unions are the major financial institution, and we just want to give cities and fire departments another choice," Mr. Poitras said.
The credit union group expects to suggest an amendment this week that would cap the amount of public funds that could be deposited into any financial institution at $100,000, he said.
The group is pushing for this amendment to alleviate "fears on the part of banks that there would be an outpouring of funds from their institutions into credit unions," Mr. Poitras said. "But that's not going to happen."
To bankers, though, it is a matter of principle.
"It's completely unfair that credit unions want to benefit from tax dollars when they themselves do not pay taxes," said Daniel J. Hempy, the chairman of the Oregon Bankers Association and the executive vice president of $381 million-asset Pacific Continental Bank in Eugene.
In response to the credit union measure, the bankers group asked Rep. Greg Smith, a Republican, to introduce legislation to assess the state's 6.6% excise tax on credit unions with state charters and more than $100 million of assets. Ten credit unions meet those parameters.
Officials with the Credit Union Association accused the banking lobby of initiating the tax bill as payback for the credit unions' efforts to gain access to municipal deposits.
"This is a response by the Oregon Bankers [Association] for us getting our public funds bill introduced," asserted Pamela Leavitt, the group's chief lobbyist.
Thomas Perrick, the Oregon Bankers Association's president and chief executive officer, acknowledged as much.
He added that bankers were ready to launch a similar tax effort last year but held off when the credit union lobby agreed not to push the public funds issue too hard. "This year, unfortunately, we have not found any common ground on this point. Therefore, we decided to pursue this tax bill."
The tax bill is similar to proposals introduced in other states in that it aims to delineate between large, diversified credit unions and smaller, traditional ones, Mr. Perrick said. "It's merely an attempt, as all of them are across the country, to strive for a level playing field."
Mr. Poitras said he is worried that the tax issue could interfere with the public funds bill, which is scheduled for a hearing Thursday, either because the issue will get more complicated or because banker-backed lawmakers may seek to combine the two bills.
But Mr. Perrick insists that bankers have no such strategy. He said his group would oppose the public funds bill and work with legislators to move the tax bill separately.
Both Mr. Perrick and Mr. Poitras, who meet on a regular basis to discuss issues of common interest, said they are open to discussing the tax proposal further.
