A proposed tax increase on Iowa’s credit unions seems dead for the 2018 legislative session.
Republican lawmakers worked Wednesday on crafting their tax cut legislation, but planned to leave out language that would apply the same state franchise tax to credit unions that banks pay.
Even so, the idea may not be completely off the table for the future.
“There is no banks or credit union language in this. I will say there could be in another bill,” Sen. Randy Feenstra, R-Hull and chairman of the Senate Ways and Means Committee, said of the Republican tax plan.
That would mark a difference from what Feenstra’s chamber passed earlier in the session.
Iowa banks currently have to pay a five percent franchise tax and credit unions pay a moneys and credits tax worth 0.5 percent of their reserves. In a Senate bill approved in March, both would pay a franchise tax of two percent on the first $7.5 million of annual profit and four percent for any beyond that.
The House GOP was not receptive to the credit union tax, however. On Wednesday, Rep. Guy Vander Linden, R-Oskaloosa and chairman of the House Ways and Means Committee, said he did not want to take up the credit union tax.
“My thinking is first of all, I don’t like to raise taxes on anybody and this would have required us to raise taxes on credit unions,” Vander Linden said.
‘THESE FOLKS HAVE CHANGED’
Iowa’s banks and credit unions have sparred for years over whether the latter should face increased taxes.
ARTICLE CONTINUES BELOW ADVERTISEMENT
The issue revolves around whether Iowa’s larger credit unions, such as North Liberty-based University of Iowa Community Credit Union, should pay higher taxes as they expand throughout the state. The Iowa Bankers Association has argued those credit unions now effectively act the same as banks, but don’t pay the same taxes.
UICCU is the largest Iowa-based financial institution and reported assets of about $4.7 billion in 2017. The largest Iowa-based bank, Bankers Trust, reported assets of about $4.5 billion for that same year.
“I can tell you, during my tenure as CEO of the Iowa Bankers Association, I never thought I would see that happen. It’s just an indication of how these folks have changed,” Iowa Bankers Association CEO John Sorensen said.
Credit unions, though, have pointed to their treatment as not-for-profits as a way they save members money and offer competition to banks that still dominant Iowa’s financial market.
“Our sole purpose of being here is to enhance the financial well-being of the member owners that we serve,” UICCU Chief Executive Officer Jeff Disterhoft said.
DEBATE LIKELY TO CONTINUE
While he had yet to see the final tax bill, Disterhoft said UICCU would be pleased if a credit union tax wasn’t included.
“I don’t think we’re ready to celebrate just yet, but as an organization that really thrives on the financial well-being of our members, we’d be very excited if what we’ve heard comes to pass,” Disterhoft said.
Sorensen, meanwhile, said his association has made progress on advocating for the tax this year.
“I think we made some real headway. The bill passed the Senate. That’s never happened before,” he said.
Both also said they expect to continue the debate next legislative session.
ARTICLE CONTINUES BELOW ADVERTISEMENT
Thank you for signing up for our e-newsletter!
You should start receiving the e-newsletters within a couple days.
“We have no intention of scaling back. If anything, we’re a bit emboldened by the success that we had this year,” Sorensen said.
Disterhoft said he doubts talk of increasing taxes on credit unions goes away soon.
“I don’t see that going away, especially next year. This year is more of an election year, next year not quite so much. I think it would seem somewhat likely that all the education, lobbying and risks that we faced this year could very well surface” next legislation session, he said.
l Comments: (319) 398-8366, email@example.com; (515) 243-7220, firstname.lastname@example.org