Iowa bankers mobilize on credit union issue
Spurred by a credit union’s attempt to buy a bank, the Iowa Bankers Association used its annual management conference to announce a major offensive against the tax-free status of the state’s largest credit unions. “Because of the acquisition, our issue has really gained some traction,” Sharon Presnall told bankers at the Feb. 5-6 meeting in Des Moines. Presnall is the IBAs senior vice president for government relations.
The University of Iowa Community Credit Union announced Jan. 23 its intention to purchase the Hawkeye State Bank in Iowa City. Since the announcement, the IBA has been formulating a response to what it considers to be over-reaching by the credit union. The merger would automatically make the bank’s customers members of the credit union, and take a profitable bank off the income tax rolls.
Presnall said the IBA will advocate passage of legislation which would tax the state’s largest credit unions. Presnall called it a “very narrow bill that affects only the very largest credit unions.” She said 90 percent of the legislators would not be affected by the bill.
Rep. Lance Horbach has agreed to sponsor the bill. Horbach is a Republican, although Presnall described the effort at non-partisan.
The bill, if it becomes law, would only apply to state chartered credit unions with more than $100 million in assets. Nine credit unions would be impacted by the law, including the University of Iowa Community Credit Union, which has assets of $260 million. State chartered credit unions presumably could avoid state taxation by converting to a federal charter. But IBA said that in other states where there is a tax on credit unions, there has not been a flood of charter conversions.
The IBA has long complained about the unequal tax treatment of banks and credit unions, and legislators have generally shown little interest in the issue, but Presnall said things may be different now.
Rep. Chuck Gipp, the House Majority Leader, told bankers their timing is good. “It’s the dumbest political thing I’ve ever seen for a credit union to buy a bank while the legislature is in session,” Gipp said. “It’s the dumbest thing I’ve seen in 12 years.”
Gipp said that over the years many legislators have been “sitting on the fence” about credit union taxation but that now “they will be falling on one side or the other.”
Rep. Bill Dix, chairman of the House Appropriations Committee, said the state is suffering from a serious budget deficit and that if bankers want to propose new sources of tax revenue, “I’m all ears.”
The IBA began airing one-minute commercials on 24 radio stations. The association also hopes to get bankers to mail 10,000 letters to legislators. IBA is producing three successive post cards that it will distribute to members, who are being asked to sign the cards and forward them to their elected officials.
The effort will peak with what the association is billing as its “first ever Bank Day at the Capitol.” The association hopes to get enough people to fill at least 10 buses, which will pick people up around the state and convene at the Capitol. The event is set for early March.
Joe Vich, Community National Bank of Waterloo, is heading up IBAs credit union task force. “We get over 1,000 people every year to the Iowa State, University of Iowa football game,” he said, referring to a popular IBA-sponsored event. “If we can’t get more people out for this, then that really says something about our priorities.”
Vich said he believes the bankers have 30 to 45 days to make something happen on the credit union issue. “We have never had a better opportunity but we have to act quickly,” he said.
By Tom Bengtson
Copyright NFR Communications Inc Mar 1-Mar 14, 2003
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