TALLAHASSEE, Fla. – The banker onslaught at the state level continues, this time in Florida with a new tax study, partly funded by the Florida Bankers Association, questioning the viability of the tax exemption – specifically for the state's "large, full-service credit unions." The study was done by Florida TaxWatch, a non-profit group that bills itself as the "eyes and ears for fiscal accountability throughout Florida." The group confirmed that the Florida Bankers Association did contribute money for the study, but would not say how much, only saying it wasn't for the entire cost. The study concluded that the total local, state and federal tax exemptions granted for Florida credit unions totals $102.2 million. Of that number $30.3 million is state taxes, $70 million federal income tax, and $1.9 million local sales tax. To highlight CUs' tax exemption, the study created a hypothetical financial by averaging data from 10 Florida credit unions in the $46 million to $56 million asset range. The institution has $214,000 in taxable income, expenditures subject to sales tax of $513,000, and total real estate loans of $3.9 million. "If this institution is a bank or savings association, it would incur a total income tax liability of approximately $78,500, total sales tax of $35,700 and intangibles taxes of $7,000. While this bank would pay total taxes of $121,200, if this institution is a credit union it would pay none of these taxes," stated the study. The bankers in Florida appear concerned about Florida CU's growth as the study chronicled their expanding role in the state: from 722,000 members and $567 million in assets in 1970; 2.6 million members and $9.7 billion in assets in 1990; and finally four million members and $25.6 billion in assets in 2001. The study also gave a historical perspective as to credit unions' expanding product lines, which it attributes as one of the reasons for their growth in the state, and why they are now on a level playing field with banks. In the end the Florida TaxWatch study concludes that "the unequal treatment of banks and credit unions has become harder to justify. It is a central tenet of a fair and competitive tax structure that similarly situated entities are taxed similarly." Kurt Wenner, senior analyst for Florida TaxWatch, said the study was done to give lawmakers the information they need to evaluate the credit union tax exemption. "It seems that it's a different environment now than when the tax exemption was put into place. The larger credit unions compete more closely with taxed financials. Should they be treated the same way tax wise? What we wanted to do was put a price tag on it so the decision makers can decide whatever benefits accrue from taxing credit unions, and if it's worth it," said Wenner. Like bankers did in Utah, this study appears to be targeting Florida's larger credit unions. "In Florida there are a couple of very large credit unions that account for most of the tax exemption. I think it's really the big ones maybe that need to be looked at most closely. There are many small credit unions that don't compete directly with taxable financials," said Wenner. According to the study the top three credit unions in Florida, each with assets over $1 billion, comprise one-quarter of the total tax exemptions. Credit unions with assets of more than $100 million make up only 21% of the state's CUs, but account for 90% of the value of the exemption, the study said (see chart on this page). Florida Credit Union League VP of Communications Mark Ivester questioned what size or services has to do with the exemption? "The real reason why credit unions are tax-exempt has nothing to do with size or services they offer. They are not-for-profit, democratically-controlled, and they don't have stockholders. This was created in 1937, reaffirmed in 1951, and again in 1998," said Ivester. Ivester said the League wasn't taking any chances with this study. The day after it was released it had its lobbyists in Tallahassee ensure that lawmakers knew the credit union side of the story. Even Wenner said he didn't expect this study to have any immediate or short-term impact on lawmakers, but with three weeks left in the Florida legislative session, Ivester said the League wasn't taking anything for granted. The League is particularly watching out for some last minute amendment to tax credit unions being added to one of the many bills being considered. In Florida, an amendment has to be germane to the subject of the bill to be tacked on. Ivester said the League has identified 93 potential bills where this could happen and is monitoring them closely. "At one point they (Florida TaxWatch) had a sterling reputation. They've watched over the budgeting, and have done studies finding waste in spending. But when you sell your services out on the street to a group like the Florida bankers, you lose credibility," said Ivester. "It makes you feel like you're dealing with the Minister of Information for Iraq and he's telling us there are no Americans in Baghdad. They're saying credit unions have an unfair advantage." Ivester said with a state budget of $50 billion he doubts the Florida legislature would take on the kind of controversy that would arise when attempting to tax Florida CUs for the additional $30 million that would be brought in. He also pointed out, as has been the case in Utah, that state charters would simply convert to federal charters. However, Florida TaxWatch used its study to show lawmakers what taxing state charters would allow the legislature to do with the extra money. "The $30 million in state tax dollars could fund three new schools, pay 1,100 first-year teachers, fully serve the 170,000 Healthy Start clients, or add 11,000 elderly to Community Care for the Elderly," the study stated. Interestingly, the Florida League joined Florida TaxWatch only a month ago. The reason? To get an inside track on the study results. That didn't work, said Ivester, as the League was denied a request to sit in on a teleconference press briefing announcing the results, even though bankers were allowed on the call. Aside from the League, there are a few Florida credit unions that are members of Florida TaxWatch, but Ivester poined out that there is no CU representation on the board or the board of trustees of the organization where big banks such as Wachovia and Suntrust are represented. Bucky Sebastian, CEO of the $1.46 billion GTE FCU, Tampa, Florida, said the bankers paid for the study, and they got what they paid for. He said bankers continue to base their arguments around CUs getting larger and offering more services to divert attention from the facts. "They don't want anyone to focus on the fact that they exist to take money from their customers and give it to their stockholders. We exist to take money from our members and give it back to our members without a profit motive. And we do it more efficiently; the very reason they're nervous is credit unions have a better way of doing business," said Sebastian. He said it doesn't take an economist to figure out that credit unions are paying their fair share of taxes through their members. He offered the example of a consumer in Florida depositing $1 million in a one-year Bank of America CD that is currently paying about 1%. Over at Suncoast Schools that same CD is just over 2%. At the end of the year a depositer at BofA in the 30% tax bracket is going to pay $3,000 in taxes on that investment, while the Suncoast member in the same bracket will pay $6,000 in taxes. "We pay twice in tax. Our members pay it because we give it back to them, unlike the banks who pay the Rockefellers and Mellons." Sebastian also said banks have found plenty of ways around taxes. "Any dispassionate, objective research or study would find out that banks don't pay a lot in taxes. They've been very successful in getting tax credits, tax deferrals. They're paying very little in taxes," said Sebastian. Ivester said this study comes at a time when banks are in front of Congress trying to expand Subchapter S. "Already in this state we have 46 banks which are Subchapter S, ranging from $29 million to $1.19 billion. I guess they ought to look at banks too," he said. [email protected]