Pennsylvania FOM Oral Argument Held in Commonwealth Court

PHILADELPHIA – Oral argument was held Nov. 16 in Commonwealth Court here on issues of credit union taxation and community charters for Freedom CU and TruMark Financial CU. The case in question stems from a suit brought against the Commonwealth by the Pennsylvania Bankers Association, the Pennsylvania Association of Community Bankers and two member banks after Secretary of Banking A. William Schenck issued a final decision in Dec. 2004 in favor of the two CUs’ applications to convert to community charters. The CUs’ applications were originally filed with the Department in Nov. 2003. In appealing Schenck’s ruling, the bankers asserted that the communities in question were not “well defined” and that the CUs’ business plans could not serve those communities. The PBA also challenged the CUs’ tax-exempt status by asserting that community chartered credit unions should pay Pennsylvania’s Mutual Tax, a tax that’s levied on mutual savings banks. In February, the Pennsylvania Credit Union Association announced it had entered the FOM litigation in support of Schenck’s decision. A similar lawsuit is pending concerning Belco Community CU which was approved to convert to a community charter in July. The bankers and credit union sides were each given 15 minutes to present their case in front of the appellate panel on Nov. 16. While there is no deadline for the Court’s decision, the Pennsylvania Credit Union Association said it’s hopeful for an announcement early in the first quarter of 2006.