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TALLAHASSEE, Fla. – Florida and Utah may be thousands of miles apart on opposite sides of the U.S., but state-chartered credit unions in both states may face the prospect of lobbying by their state’s bankers association for the taxation of credit unions. At press time, the Utah Bankers Association introduced a bill in the State legislature on Jan. 20 to tax CUs with $100 million or more in assets. (See related story on page 1) In Florida, a well-known state budget watch dog group called Florida Tax Watch is conducting a study to discern how much revenue federal and state governments are losing by not taxing credit unions. The study was requested by FBA President Jerry Smith, president of First National Bank of Alachua. Florida Credit Union League Executive Vice President Mark Ivester said it is his “understanding” the study is being funded by the Florida Bankers Association. Ivester said the study is similar to one Florida TaxWatch conducted in February 1997 that examined the CU industry, nationally and in Florida. The report estimated the value of various federal and state tax exemptions afforded CUs and presented arguments for and against taxing them. The report also estimated the value of Florida SCCUs’ tax exemptions from federal and state income taxes as well as state intangibles, sales and documentary stamp taxes to be $89.1 million annually, based on 1995 data. Of that amount, Florida TaxWatch stated that $64.6 million are federal taxes; $24.0 million, state taxes; and $.55 million are local. “In ten years, Florida TaxWatch estimates the total annual value of the tax exemptions will reach $217.1 million – $162.6 million for federal, $53.3 million for state and $1.2 million for local taxes,” the report read. In its discussions of the pros and cons of taxing CUs, Florida TaxWatch cited proponents’ arguments that CUs “have moved away from their original purpose of serving those with limited access to financial markets.” Opponents emphasized the not-for-profit nature of CUs and that “taxation would create pressure to eliminate free or below cost services provided to members.” The 1997 report concluded that “in considering the tax-exempt status of credit unions, the effect on competition is only one factor that should be examined by lawmakers. It must be remember that the tax-subsidization of the industry benefits credit union members at the expense of tax-paying non-members. Tax exemptions should be viewed as `tax expenditures’.” Florida TaxWatch suggested that if lawmakers consider taxing credit unions, only the largest CUs should be taxed “as one way to reduce the effect taxation would have on public benefits.” The report concluded that “As economic and competitive conditions substantively change, tax laws may need to be re-assessed to consider those changes.” Ivester said the FCUL hasn’t yet heard any murmurings around the halls of the state legislature about a bill to tax credit unions being introduced. “The Florida Credit Union League is well aware of the budget problems in Florida, but if there’s anyone proposing anything in the state legislature concerning taxing credit unions, we’re not aware of it, and we have our ears to the ground,” he said. Ivester added that, “I don’t know anyone who wants to take up the battle to tax credit unions for what would amount to a relatively insignificant amount of money.” Less than half of the 246 credit unions in Florida are state-chartered. But if that ever occurs, “You can be sure what would happen next if state-chartered credit unions in Florida were faced with paying a tax that federal credit unions didn’t have.” -

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