Guest Columnist

Credit unions face a new legislative challenge

Money in a cash drawer. (Cliff Jette/Gazette Archives)
Money in a cash drawer. (Cliff Jette/Gazette Archives)

Enough already.

Iowans are getting tired of banks whining while they rake in a record $1 billion in profits, control almost 90 percent of the Iowa financial market and recently received a $142 million federal tax break that has propelled their profits to an all-time high. How much more do they want?

The decades-old attempt by the Iowa banking lobby to increase taxes on credit unions and limit access to financial choice has resurfaced.

Bankers also are misleading Iowans and seem to follow the “if you say it enough, people will believe it” theory. The truth is, Iowa credit unions pay millions in taxes each year to state and local governments, including a state tax on legal reserves that banks do not pay.

Banks are trying a new tactic — not only do they want to raise taxes on Iowa credit unions and their members, they also want to limit access to credit unions for rural Iowans.

The tax difference between banks and credit unions was thoroughly vetted during tax reform discussions on both the federal and state levels the past two years, and both Congress and the state Legislature reaffirmed that cooperatively owned credit unions should be taxed differently than for-profit banks because of their structure. This is similar to other industries that are taxed differently based on structure.

If the banking industry is so concerned about maximizing tax revenue for the citizenry, why did they advocate for their own income tax mitigation through Subchapter S structure in the 1990s, which significantly lowers state and federal revenues? More than 60 percent of Iowa banks are now organized as Subchapter S. In 2017, Iowa’s Subchapter S banks avoided paying $64 million to the federal government that would have been paid without the Sub-S tax election.

Let’s pull the curtain back and see how many tax credits the banks have cashed in at the state level. In 2017, Iowa banks avoided more than 72 percent of their state franchise tax liability through tax credits and deductions. Although their state tax liability was $53.8 million, their net payment to the state general fund was only $14.8 million.

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Banks must not be so concerned about Iowa’s financial well-being after all. Perhaps they will work with the Iowa Legislature this session to do away with the Subchapter S election for banks.

It’s time to move on. Many Iowans are struggling, and we need to focus efforts to address the issues they are facing. If banks truly want to help Iowa, then lower your rates and fees to help Iowa consumers, and support innovative savings programs to help them better their financial lives.

All Iowans benefit from a healthy and competitive financial marketplace. I urge you to contact your legislators and ask them protect the financial choice of Iowans by opposing the bank efforts to eliminate access to cooperatively owned credit unions in Iowa’s market.

• Helen Pearce is board chairwoman of the Iowa Credit Union League and CEO of Cedar Falls Community Credit Union.

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