“I would not support an increase of taxation on credit unions,” he told CU Times.

Justin Hupfer, vice president of government affairs at the Iowa Credit Union League , said the legislature traditionally has not tackled the issue of credit union taxation. “That's the farthest it's gotten,” he said. “It hasn't happened in decades, if ever.”

“In 2003, we made significant traction to address this issue in Iowa, as a credit union tax bill was advanced by a Senate committee,” said John Sorensen, president/CEO of the Iowa Bankers Association.

As state legislatures have been gaveled into session across the county, banks and credit unions have continued their annual battles over the taxation of credit unions. Congress last year enacted a tax overhaul that did not include taxes on credit unions—despite the urging of banking groups. But Senate Finance Chairman Orrin Hatch (R-Utah) has signaled a desire to revisit the issue this year.

Meanwhile, Iowa has become ground zero for a state legislative battle.

And the lobbying has been aggressive, with bankers emphasizing that a credit union tax would simply be fair and credit unions questioning why legislators would want to increase taxes on anyone if their intention is to cut taxes.

The Iowa Credit Union League held a rally at the state capital Wednesday. The rally included comments from CUNA President/CEO Jim Nussle, who previously represented Iowa in the U.S. House of Representatives.

“Giving political speeches about reducing taxes on Iowans and then turning around and voting for a hidden, back door tax on 600,000 Iowans is not pro-growth, not conservative, and not very Republican,” said Nussle.

Hupfer said the league was not surprised by the bankers' efforts. He said that once it became clear that the legislature was going to tackle comprehensive tax legislation, the league expected the bankers to push their plan.

He added, however, that the league argument that the credit union tax would represent a tax increase on Iowans has gained traction.

“Nobody's looking for a tax increase in Iowa,” he said.

But Dave Caris, CEO of the Community Bankers of Iowa, said he believes there is a growing recognition in Iowa that large credit unions essentially operate as banks.

“They've overstepped their bounds,” he said.

“In Iowa, we have a select number of mega credit unions that have aggressively expanded well beyond the intent of the original tax exemption provided in the early 1930s,” Sorensen said.

He said that the smallest credit unions would not be taxed, under the Senate plan.

“But small credit unions need to understand that the actions of their larger brethren are bringing into question their tax exemption at every level,” Sorensen added.

The bankers and the credit unions are attempting to rally customers and members to push their legislators. For instance, Iowa credit union members have sent 30,000 emails to legislators, accoding to Hupfer.

Caris said bankers also have attempted to rally grassroots support. “There's nothing magic,” he said.

Hupfer and Caris agreed that it's unclear what the legislature ultimately will do.

Caris downplayed the significance of having the Ways and Means Committee Chairman opposing the plan. “He's one legislator,” he said. “It's not insurmountable.”

But Hupfer said Vander Linden's opposition is a key development. “He's a very important person as chairman of the committee,” he said.

Nonetheless, Hupfer said the league is taking nothing for granted.

“These legislative sessions are marathons,” he said. “No one's going to know until they adjourn.”