WASHINGTON - Three senators have introduced a long-shot bill that would destroy a pillar of the credit union industry: its federal tax exemption.

The Unlimited Savings Allowance Tax Act of 1995, a far-reaching tax reform bill, was introduced by Republican Pete Domenici of New Mexico and Democrats Sam Nunn of Georgia and Robert Kerrey of Nebraska. It would impose an 11% flat tax on virtually all businesses, including credit unions.

The regulator and the industry are dead set against it.

"I think the tax exemption is one of the key underpinnings of the workability of the credit union" industry, National Credit Union Administration Chairman Norman E. D'Amours said in an interview.

"I'm already in touch with some people in the Senate to make sure it doesn't tax federal or state credit unions."

"We're obviously opposed to the taxation of credit unions," said Charles O. Zuver, director of governmental affairs for the Credit Union National Association. "There are probably good things in that bill, but taxing credit unions isn't one of them."

Credit unions would be taxed 11% of gross profits, which would be figured by subtracting expenses and reserves for bad debts from taxable receipts, including earnings on loans, gains on the sale of loans, points, and fees.

Taxable receipts would not include amounts received as contributions to capital.

Ernie Christian, a Washington-based attorney who helped draft the bill, said credit unions were not singled out. Rather, the industry is a victim of a new approach to taxation.

"The concept is to collect a partial, low-rate tax at the source as businesses produce gross domestic product in the form of goods or services," Mr. Christian said.

"It was not a decision to say, O.K., we're going to tax credit unions," he said. The elimination of the exemption is "the strategic and conceptual consequence of this kind of tax system."

Mr. D'Amours said the bill as written might not tax federal credit unions. The bill does not tamper with the Federal Credit Union Act, from which the tax exemption is derived.

But sources indicated the loophole was an oversight that could be corrected if the bill moves ahead.

Past efforts to tax credit unions have been drowned by a flood of angry letters from members, so industry sources expect this one to be overwhelmed as well.

But Mr. Zuver has urged industry leaders to hold off.

"It's too early to do anything," he said. "No hearings have been scheduled, and Congress still has to get through the budget process.

"I hope credit unions don't start a massive letter-writing campaign or racing up to the Hill," he said.

Instead of overreacting at this early date, the industry should keep an eye on whether the proposal progresses during this busy Congress and whether similar legislation surfaces in the House, he said.

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