Iowa community credit union

Iowa bankers rally at Capitol for credit union taxation

Iowa banks and credit unions squared off at the state capitol in Des Moines over a proposal to place an income tax on the state's six largest credit unions.

On March 10, an estimated 1,000 credit union members rallied at the capitol in opposition to the tax. The Iowa Bankers Association organized a rally of 400 supporters the following day, March 11, in a victory for the bankers. On an 8-7 vote, the Senate Commerce Committee approved a proposal that would require credit unions with assets exceeding $150 million to pay a 5 percent tax on earnings not returned to members.

The proposal has a long way to go. The bill still needs full Senate and House approval and the governor's signature to become law, and credit unions do not lack friends at the capitol. State Rep. James Van Fossen, the Republican chairman of the House Ways and Means Committee, and Democratic state Sen. Michael Gronstal, the minority leader, spoke to the credit union advocates at their rally. Van Fossen and Gronstal drew cheers when they displayed their own credit union membership cards.

Nevertheless, bankers at that rally said their message is simple and will resound. "We're just looking to level the playing field," said Joe Vich, president, Community National Bank, Waterloo. "We're only asking that the six largest credit unions in the state be taxed. They are acting like banks and should be taxed like banks." Vich brought 15 staff members of his bank to the rally.

John Sorensen, IBA president, said bankers need to stay focused in order to get this bill signed.

"The credit unions that would be affected by the tax are larger than 90 percent of the banks in Iowa and act essentially like banks," said Sorensen, who added the bankers are honing in on the tax issue at a time when the state budget faces a shortfall.

"We're trying to get away from this bank versus credit unions issue," Sorensen said. "What we're saying here in Iowa is that this is an issue for Iowa taxpayers. We have six of the largest financial institutions in our state that have a multimillion dollar tax subsidy at a time when, frankly, our state budget could use the help."

Other states have been considering taxing credit unions this year, but the measures have met roadblocks. A bill in New Mexico is in an indefinite period of "formal study." A measure in Utah that would have taxed credit unions was excluded in the eleventh hour from a bill and voted to a two-year study period.