AUSTIN, Texas – A proposed payroll tax that would have applied to state-chartered credit unions was struck from the Texas House of Representatives' school finance plan before the bill was narrowly approved and sent to the Senate last week. As recommended by the Select Committee on Public School Finance, HB1 had originally proposed a tax of $125 per quarter on each full or part-time employee, or $500 annually. The bill exempted charities and governmental entities from the tax, but lobbyists had been unsuccessful in gaining exemption for state-chartered credit unions. According to legal opinion from the Texas Credit Union League, federal credit unions would have been exempted by federal law preemption. The Texas League had issued an urgent call to action for credit unions to contact their legislators to voice opposition to the bill. The Texas Legislature currently is in a called special session to address public school finance and property tax relief for homeowners. HB1, introduced in mid-April by Rep. Kent Grusendorf (R-94), now has been stripped of more than $3 billion in key funding elements with no replacement alternatives. In addition to the payroll tax, other controversial revenue-generating measures slashed from the House version of the bill include video slot machines, an increase in the motor vehicle sales tax and a sales tax on auto repairs. Provisions retained by the House version were an increase in the state cigarette tax and in the state sales tax and a decrease in the maximum property tax rate. The House apparently passed the stripped-down version of the bill to avoid lengthy debate that might ultimately kill chances of bill's passage during the called session that ends May 20. Now the onus belongs to the Senate. While anything is possible in a quest for funding, the Texas Senate has not been prone to discuss taxation of not-for-profits, including credit unions. "The Senate is expected to consider alternative revenue sources," said Texas Credit Union League's SVP Advocacy Buddy Gill. "The two that have been mentioned are a new business activity tax and expansion of the existing franchise tax, which only affects one in six businesses." "It is important, however, that credit unions had their grassroots voices heard in debate yesterday, so that legislators are very familiar with the words `not-for-profit credit unions,'" he continued. "We will continue to work with the Senate to ensure that not-for-profit credit unions remain exempt from the tax code." -

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