Washington State Audit Committee Recommends Continuation of Credit Union Tax Exemption
August 30, 2011
August 30, 2011
The Washington State Joint Legislative Audit & Review Committee (JLARC) is recommending continuation of the state-chartered credit union B&O tax exemption, stating that the exemption removes an incentive for state-chartered credit unions to become federal credit unions and thus leave the state system of regulation.
The state-chartered credit union B&O exemption is estimated to be $60.9 million for the 2011-13 Biennium.
JLARC will next hold a hearing on their preliminary report for public comment on Sept. 23 and will then send final recommendations to the Legislature for their consideration.
Of the 25 tax preferences reviewed by JLARC this year, one is being recommended for termination, two are being allowed to expire, eight will be reviewed by the legislature, and 14 will be continued.
One of those tax preferences being recommended for review is the bank’s B&O tax exemption on interest derived from investments or loans primarily secured by first mortgages or trust deeds on non-transient residential properties in Washington. JLARC’s rationale for this review is that it is unclear whether the original public policy objective applies, given changes in the lending industry and the rise in the secondary mortgage market. JLARC found that 87 percent of Washington mortgages are sold on the secondary market, and 70 percent of Washington mortgages are now made by out-of-state banks. They found no conclusive evidence that the deduction increased loan availability or decreased loan costs in Washington. This exemption is estimated to be $172.6 million for the 2011-13 biennium.
JLARC is comprised of an equal number of House members and Senators, democrats and republicans. JLARC’s non-partisan staff auditors conduct performance audits, program evaluations, sunset reviews, and other analyses assigned by the legislature and the committee.
Questions or Concerns? Contact Mark Minickiello, Vice President of Legislative Affairs.
Posted in Advocacy News.