In testimony before the Multistate Tax Commission, Thomas G. Siciliano, senior vice president and general counsel for Municipal Credit Union in New York, said taxing credit unions would hurt states more than help them.
The hearing revolved around a proposal the commission is designing for state legislatures. The draft would allow states to tax the net income of financial institutions doing business in their state.
The hearing was held in New York City on Sept. 30, and Mr. Siciliano was speaking on behalf of the Credit Union National Association and the New York State League of Credit Unions.
Any plan to treat credit unions the same as for-profit, stock organized financial institutions would seriously jeopardize the credit union concept and contradicts current law.
The MTC (Multi-Tax Commission) proposal, if adopted on a nationwide scale, would seriously impact the dual chartering system -- the ability to choose between a state or federal charter. Many of the 5,485 state chartered credit unions adversely affected by the proposal would likely convert to federal charters for protection....
A number of states experiencing budget difficulties have reviewed the credit union tax exemption; however these state governments have wisely concluded that credit union taxation would actually decrease revenue to the state.
This was recently the case in the state of California, where legislation to overturn a recent ruling by the California Franchise Tax Board which imposed a tax on state-chartered credit unions, has passed ... and now awaits the governor's signature. [It has since been signed into law.] If the bill would not have passed, there would have been a wave of conversions to federal charters in order to avoid the new tax liability. Conversion by the 250 state-chartered credit unions in California would have led to the loss of $10 million a year in existing revenue, since these credit unions are already subject to a state sales tax, and examination and licensing fees....
In conclusion, CUNA and the New York State Credit Union League strongly urge MTC to exempt credit unions from the statuatory proposal.