After several hours of debate Monday, Utah House members approved a controversial bill that would tax Utah's largest credit unions by 5 percent and create a task force to define when a credit union loses its tax-exempt status.

The 10th version of House Bill 162, sponsored by Rep. Jeff Alexander, R-Provo, passed by a vote of 42-32 and now moves on to the Senate.

House members voted to remove the 5 percent tax and tabled the bill early in the afternoon, but resurrected the legislation later on with the tax intact.

Alexander's plan removed a 30 percent tax on the retained earnings of Utah's three most aggressive credit unions, letting a task force study that over the summer. The bill would keep a 5 percent corporate franchise tax on Mountain America, America First and Goldenwest credit unions.

The bill has caused division between both lawmakers and the public, and has incited an outcry from credit unions.

"Half of our constituents are going to be angry no matter how we vote," said Rep. Steven Mascaro, R-West Jordan. "And whichever side loses will be back again next year to discuss it again."

Rep. J. Morgan Philpot, R-Midvale, said the state was taking funds that would hurt Utah's economy.

"We're about to raise a $2 million tax on the backs of an industry in Utah, and I don't know if that's a smart move without any balancing," Philpot said.

The three credit unions have been accused of aggressively expanding at the expense of Utah banks and arranging commercial loans for more than the $250,000 limit. However, credit unions have said no tax is acceptable.

Another plan to scrap Alexander's bill and simply create a task force to study the tax question was defeated Monday by a 42-32 vote.

After Monday's final vote in the House, the Utah League of Credit Unions Vice President Brooke Moea'i said it was a disappointment, but the fight is not over. She said she is hopeful the league will have more support to defeat the bill when it reaches the Senate for a vote.

"We're very disappointed they didn't listen to the people of the state," she said.

The House also turned back an attempt by Rep. Neal Hansen, D-Ogden, to appoint a task force to study the bank versus credit union issue for a year.

Hansen said the fact that there were more than 10 versions of the bill circulating, including three drafts from Alexander, was proof there were several ideas for resolving the issue that needed further study. Also, it was too complex an issue to deal with in a 45-day session.

Rep. Brad Dee, R-Ogden, said if the legislature created a task force, it would have to look at everything. It would not make sense to impose the tax and then ask a task force to examine the issue.

Ideally, he said, the banks and the credit unions should sit down in a room and work out the problems on their own.

"I might include a television camera and call it the new reality TV show," Dee said.

But opponents said deferring the issue to further study does not resolve the equity issue.

Rep. James A. Ferrin, R-Orem, said the issue is simple. If a credit union has expanded beyond its role, it should not enjoy a tax exemption. He said the state already taxes commerce in the commercial sphere.

"The guy down the street sells tacos, and we tax him. I sell mutual funds and I pay the taxes," Ferrin said.