Utah Task Force Adopts Anti-Credit Union Resolution, 7-4; League Prepares to do Battle Yet Again

SALT LAKE CITY – The Utah legislature moved a step closer this month to draw Congress directly into the bank/credit union fray over taxes and NCUA regulatory powers following a 7-4 adoption of an anti-CU resolution by a special Financial Institutions Task Force. Although the panel’s unfavorable anti-CU vote was not a surprise, the Task Force passage of the unusual resolution set the stage for another bruising 2005 fight in the state legislature and now – to the delight of the American Bankers Association – tax exemption and NCUA policies could conceivably be brought before Congress in a petition from the Utah Legislature. Calling the panel’s action reckless and the process flawed, the Utah League of Credit Unions vowed to fight the banker-supported petition which asks to “affirm the authority of states and local governments” in taxing CUs regardless of charter and to consider overturning NCUA regulations on field of membership “as over broad and inconsistent” with federal law. The resolution, which has been in the works for months as drafted by bank supporters on the joint House-Senate panel, now goes to the full legislature for a vote expected perhaps in late January. Based on the political makeup of the legislature and the influence of ABA chairman-elect Harris J. Simmons, chairman of Zions Bancorp, the state’s largest, leaders in the Utah League have not been overly optimistic the resolution could be turned back. “It’s going to be tough – flat-out tough,” declared Scott Simpson, president/CEO. “The bankers are after a tool to try to export the problems they’ve created here nationally, and credit unions in this state are not about to allow that to happen.” Simpson said it was astonishing that CUs “have never been asked to testify before this task force” nor have banks and yet the task force went ahead to adopt such an ill-thought document. “There is no crisis here,” said Simpson. “There’s nothing that demands this kind of attention from our government” and yet Utah lawmakers are trying to make something happen at the federal level. Suddenly, he said the Utah legislature “is prepared to go to Washington and tell them how they should approach this issue.” The league’s lobbying before the task force comes amidst a much-heralded and stepped-up TV advertising campaign on CU awareness and advocacy launched last month aimed in large part at blunting the anti-CU rhetoric now evident in the legislature. The CU “difference is you” ads with a friendly “Mr. Bob the Credit Union Guy” theme and with a slightly different format adopted by the Credit Union Association of Oregon, seek to explain the non-profit structure of CUs and stress the important financial role of CUs in communities. As adopted by the task force, the petition to Congress – underscoring the ABA divide-and-conquer strategy of focusing on the largest CUs in the nation -affirms “the legislature’s decision to establish a classification of `non-exempt credit unions’ and encourages Congress to adopt a similar approach.” The resolution requests Congress put together a “fair and equitable tax structure that allows the state to determine which state and local taxes shall apply to financial institutions.” It also asks Congress in distributing federal monies to Utah “take into account revenues that may be lost as a result of federal tax policy related to financial institutions.” In the debate prior to the task force vote on Nov. 30, some lawmakers suggested there was such confusion on CU tax structure that perhaps Congress could sort things out. Rep. LaVar Christensen, (R-Draper), was quoted in a Deseret News account of the meeting that he is “so disappointed that this issue has become, for whatever reasons, a political football” but that it could be “substantially a good jumping-off point” for examining the taxing process. Christensen said he will watch carefully “to make sure that the tone and tenor of the resolution strikes an appropriate balance,” and that lawmakers do not get into a debate on whether to urge Congress to tax certain institutions. “We’re trying to bring to their attention the inconsistencies, the contradictions, the confusions, the policy, the potential missteps, the obstacles, the impediments,” he said. Rep. Scott Daniels, (D-Salt Lake), said he has yet to get some justification why federally chartered credit unions, big or small, should not be taxed adding “I’m not too big on the idea of telling the federal government how they ought to regulate federally chartered institutions.” However, the idea that “they tell us that their federally chartered institutions can’t be taxed like every other business in the state, I think is a real problem,” Daniels was quoted as saying. Credit union antagonist Rep. Jeff Alexander, (R-Provo) and co-chairman of the taskforce, said he wants Congress to “give us direction” about NCUA actions that have led to expanded federally chartered CUs. Alexander is the author of a harsh anti-CU 2003 law which while dropping imposition of a CU franchise tax barred business lending and included provisions for taxing “non-exempt” CUs in the future based on asset thresholds. As for the clash in January on the petition, the league has maintained the Utah public has little stomach for another rehash of the bank/CU brawl. Simpson said it is unfortunate that lawmakers continue to discuss this issue despite having “a lot of things to talk about in this state that are of substance.” Nonetheless, Simpson said Utah CUs are well prepared to do battle over this petition. “We are defending the right of the citizenry access to their credit unions,” said Simpson re-emphasizing that despite the task force vote “this fight is hardly over.” [email protected]