Legislative committee debate heated up this week over a divisive bill that aims to tax credit unions.

Sponsored by House Majority Whip Jeff Alexander, R-Provo, House Bill 162 came before the House Business and Labor Committee Monday with a crowd of people listening to bank and credit union representatives clamoring over the bill.

The bill proposes to make state-chartered credit unions with more than $100 million in assets and that operate in more than one county subject to the state corporate income tax.

"What we are trying to access and decide on is at what point a tax exempt credit union should become taxable because of growing outside its normal charter," Alexander said. "The league (Utah League of Credit Unions) is saying we will tax all credit unions when we aren't. We are simply setting a limit for growth."

Alexander suggested only three credit unions in the state would be affected: America First, Mountain America and Goldenwest.

Scott Earl, president and CEO of the Utah League of Credit Unions, accused the bill of being a banker's bill.

"Why should banks be allowed to call the tune of credit unions?" Earl said.

Earl also contended the bill would affect Utah's families and small businesses who lean on credit unions for services.

Utah banks are healthy and hold 80 percent of state deposits and 99 percent of business loans, he said.

"What more do they ask?" Earl said.

The bottom line is, for all but three credit unions, the bill changes nothing, said Howard Headlee, president of the Utah Bankers Association.

Even for the three unions that could be affected, all that would change is they would be subject to the five percent corporate income tax, he said.

Headlee said credit unions argue the bill would only benefit banks.

"Will they say taxing Albertson's only helps Smith's?" he said.

Credit unions counter that they don't have the reserves or stock options banks have to draw on for taxes.

"Either we pull out of our reserves or we raise member fees," said Brooke Moea'I, senior vice president of the ULCU.

Moea'I also said credit unions have restrictions banks do not.

"Credit unions do have restrictions. We can't just serve anyone, anywhere, but the bill implies they can," she said.

The bill would also prohibit credit unions from merging or growing outside of their county.

Those restrictions, however, would be withdrawn if credit unions paid a competitive 30 percent equity fee.

An amendment proposed Monday that would issue a new tax on banks to level the tax-paying amount for both institutions failed to be approved by the committee.

The committee did approve an amendment Wednesday that sets the equity fee at the federal income tax rate on either the credit union's income or 30 percent of the credit union's net income, whichever is lower.

After four versions, House Bill 162 will now proceed to the House floor.
Copyright Brigham Young University 5 Feb 2003