DES MOINES, Iowa—Some of Iowa’s state lawmakers are again discussing taxing credit unions at the state level, with one official acknowledging it’s a divide-and-conquer strategy according to asset size. One banker even predicted success in Iowa on the tax issue would lead to similar success in other states.
As CUToday.info has reported, Iowa has been ground zero at the state level when it comes to aggressive efforts to tax credit unions. The state’s credit unions had to fight off taxation in the prior session of the legislature.
Leadership of the Iowa legislature were on hand for a panel discussion at the 133rd annual convention of the Iowa Bankers Association. During the meeting at Veterans Memorial Auditorium, credit union competition dominated the conversation among five elected officials, all Republicans, BankBeat reported.
‘Not an obvious Solution’
“Credit unions have options,” commented Lee Hein, chairman of the House Ways and Means Committee. “They can move to a federal charter, so that makes taxing credit unions not such an obvious solution.”
Dan Dawson, chairman of the Senate Commerce Committee, said the Senate has tried to take a new tack on the issue. “We tried to change the conversation away from banks versus credit unions, and make it about large banks and credit unions versus small banks and credit unions. But that approach didn’t get a lot of support.”
In its analysis, BankBeat reported, “Bankers and some lawmakers are looking to build on momentum built during the 2017-18 legislative session when the Iowa Senate passed a bill to extend the state franchise tax to credit unions. The House, however, did not follow up and efforts to tax state-chartered credit unions failed. By the end of the session, however, the legislature passed a law which forced one of the state’s largest credit unions to change its name. Earlier this year, GreenState Credit Union of North Liberty, Iowa, changed its name from the University of Iowa Community Credit Union.”
‘Better’ Idea: Lower Banks’ Taxes
Gary Carlson, chairman of the House Commerce Committee, said bankers and credit union representatives met on the issue this summer but no solutions emerged. “If they all go to a federal charter, we do not achieve our goal of leveling the competitive playing field,” he commented.
“If the goal is to level the playing field, it might be better to look at lowering taxes for banks than increasing taxes for credit unions,” commented Jake Chapman, chairman of the Senate Ways and Means Committee. “There’s probably more opportunity to look at the banks’ tax situation. We did that in the Senate and in the House it stalled out.”
Bankers expressed frustration with GreenState Credit Union, citing its June announcement that it is purchasing seven branches in Fort Dodge and Des Moines from First American Bank of Fort Dodge, BankBeat said.
During a Q&A period, bankers noted the state credit union charter is more liberal than the federal credit union charter. In addition to the tax parity issue, bankers expressed a desire to see the state charter pared back to at least the same rules as the federal charter. One banker suggested even if a tax were imposed on Iowa-chartered credit unions, few would switch charters because they rely on the liberties offered by the state charter, BankBeat explained.
Who Will ‘Abandon’ Iowa?
“Let’s see who is going to abandon Iowa,” said George Schneidermann of Frontier Bank in Rock Rapids, Iowa. He encouraged the lawmakers to tax state chartered credit unions and predicted it would spur other states to do the same. “If enough states follow,” he said, “Congress might follow.”
Iowa’s credit unions aren’t alone in fighting taxation at the state level. As CUTOday.info reported here, Kansas’ state charters have also been involved in a similar fight in the legislature.