WASHINGTON -- Even though nothing has been formally proposed, credit unions are trying to ensure that Charleston, W.Va., doesn't use its new taxing powers to tax them.
The credit unions are citing state and federal laws guaranteeing their tax-exempt status as evidence that any kind of tax would be illegal.
"It's not anything malicious on the part of the city, we just want to make sure that they know what the [legal] situation is," West Virginia Credit Union League President Kenneth R. Watts said in an interview.
He said any tax would impact 16 credit unions that do business in Charleston, the state's most populous city and its state capital. West Virginia has 115 credit unions.
West Virginia's Municipal Home Rule Board granted Charleston and three other cities (Bridgeport, Huntington and Wheeling) the permission to take part in a five-year pilot program giving municipalities home rule. One of the powers that Charleston officials requested was the right to set rates and change eligibility requirements for its business and occupation tax. Credit unions were not mentioned when the city applied for the program, but since then have been mentioned in some discussions as an example of the kind of tax that could be levied.
Those comments, even though they were never backed up by a specific proposal, set off alarm bells with the state's credit union community.
In a letter to Charleston City Manager David D. Molgaard, Watts said the federal and state tax exemption "applies to any tax on capital reserves, surpluses, income or shares. Both citings are very specific statutory exemptions, which I hope will sufficiently eliminate credit unions from any future consideration regarding sources of potential revenue."
Molgaard did not return several phone calls seeking comment.
But Charleston City Councilman David Higgins, who chaired the panel that devised the home-rule proposal, said any concern was premature because no decisions have been made about what additional taxes they might levy. Also, he said city officials would consult and follow state and federal laws before making any decisions.
"It's several months away [before any draft ordinances are written] and we'll be thorough," said Higgins, a lawyer who is also a Democratic member of the West Virginia House of Delegates.
One of the controversial ideas is a tax on hospitals and other health-care providers, many of which are now tax-exempt.
Higgins said most of the home rule proposals that the city requested from the state are not related to taxes. They focus on items such as forcing owners to clean up certain eyesores on their property and changes to the rules about deer hunting within city limits.