Oregon Legislative Week in Review
Some Oregon credit unions will be taxed if the stateâ€™s banker association gets its way in Salem this year. The Oregon Bankers Association late last week introduced House Bill 3263 to tax state-chartered credit unions and interstate credit unions.
February 22, 2011
Some Oregon credit unions will be taxed if the state’s banker association gets its way in Salem this year.
The Oregon Bankers Association (OBA) late last week introduced House Bill 3263. The bill will impose a corporate excise tax on state-chartered credit unions and interstate credit unions holding one or more deposits of public funds that exceed $250,000 or holding commercial loans that in aggregate exceed amount equal to 10 percent of credit union assets. The proposed legislation would apply to tax years beginning on or after January 1, 2011.
At the publishing of this edition of Anthem, the committee assignment for HB 3263 has not been made public. However, it is likely that it will go through the House Revenue Committee.
As the bill winds its way through the legislative process and the Northwest Credit Union Association learns who the key legislative players will be, we’ll be informing our Credit Union Advocates of the “next steps.”
Oregon credit unions won a key victory in the 2010 Legislature by passing a bill to lift the cap of $250,000 on deposits of public funds. This bill was actively opposed by the Oregon Bankers Association. House Bill 3263 is a response to that victory.
Association staff has been meeting with key Legislative leaders and committee chairs reminding them of these key points:
- Credit Unions pay the same share of federal, state, and local taxes as any business, including real and personal property tax and employment taxes. Our tax exemption only applies to corporate income tax because of the not-for-profit structure.
- Congress reaffirmed its support for the credit union income tax exemption in a 1998 statement reiterating that the exemption is due to the fact that credit unions are member-owned, democratically operated, not-for-profit organizations.
- Credit unions do not stop behaving like cooperatives once they reach a certain size. Whether big or small, every credit union shares the same not-for-profit structure and orientation toward member service.
- Size and services are completely beside the point. The original reason for granting credit unions their income tax exemption – their not-for-profit cooperative structure – is just as valid today as when the exemption was first granted.
- Cooperatives like credit unions typically do not pay income tax because they must pay all their income to their members. Credit unions, after transferring a portion of their income to reserves and loss accounts, must return all surplus earnings to the members as dividends, lower rates, and higher savings returns.
- Credit unions continue to be cooperative financial institutions, dedicated to meeting their members’ financial service needs, with a volunteer board and democratic control.
- Credit unions pass their savings on to members in the form of competitive interest and dividend rates, fewer or no fees, and convenience. Therefore, a tax on credit unions is another tax on consumers.
- Congress’ decision to exempt federal credit unions from income taxation was based on credit unions’ structure as not-for-profit financial cooperatives, which can build net worth only through retained earnings.
- Taxing credit unions’ retained earnings would result in reductions in net worth of credit unions. Federal law requires a credit union insured by the National Credit Union Share Insurance Fund (NCUSIF) to have a minimum net worth ratio of seven percent to be considered well capitalized.
- A tax on credit unions is a tax directly on the people the legislators most want to help – average working men and women trying for make ends meet in a difficult economy.