The House Business and Labor Committee voted 10-3 to send House Joint Resolution 1, sponsored by Rep. Jeff Alexander, R-Provo, to the full House for consideration. On Monday, an effort to send it back to the Rules Committee, from which it presumably would never re-emerge, failed by one vote.
"We need this resolution so we can move forward to push Congress to deal with this issue, which right now I don't think they want to do," Alexander said.
The resolution represents a resumption of long-standing acrimony between banks and credit unions over credit unions' tax-free status. Two years ago, Utah's three largest credit unions - America First, Mountain America and Goldenwest - switched to federal charters to avoid state taxation.
Driving that switch was the 2003 Legislature's passage of a bill, also sponsored by Alexander, that maintained the expansion of large credit unions unfairly enabled them to act like banks without having to bear the same tax burden. The legislation imposed bank-like taxes on large credit unions and also created a task force to study the divisive issues separating banks from credit unions.
Before the task force could meet, however, the credit unions moved from state to federal charters. Others followed suit. By late last year, 21 of 89 Utah credit unions in existence in 2003 had left the state regulatory fold, taking with them $4.7 billion of their combined $6.4 billion in assets. That flight cost the state millions in tax revenue.
Alexander and Rep. LaVar Christensen, R-Sandy, argued Tuesday that before the state can deal with the remaining credit unions, it needs to know whether Congress intends to address credit union issues, particularly the ability to extend membership to a broad group of people, something banks claim goes beyond the original purpose of creating credit unions.
Citing U.S. District Judge Dale Kimball's decision last month overturning the National Credit Union Administration's decision to allow Tooele First Credit Union to expand into five other Utah counties, Alexander said his resolution calls on Congress to review the federal regulatory agency's rulings regarding a number of credit unions.
Utah Banking Association executive director Howard Headlee said passage of the resolution would make an important statement that Utah supports the legislative action taken in 2003. "If you don't say we stand behind the 2003 policy, portions will [expire] and ambiguity will result," he said.
The resolution also had Utah Taxpayers Association support. Its vice president, Mike Jerman, said the current situation creates an "inequitable tax structure."
Lynn Kuehne, the Utah League of Credit Union's executive vice president, said the credit unions moved to federal charters because Alexander's 2003 legislation created a "hostile" environment and treated them as if they were "rogue institutions," even though they acted legally. He characterized the resolution as yet another way for banks "to stir the pot . . . it's their long-term game plan to pick away at little things."
State Credit Union President Scott Simpson alleged the banks have created a "false crisis" that will damage credit unions that have "fostered innovations to the benefit of consumers."
