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AUSTIN, Texas – Texas credit unions are breathing a bit easier now that the state House of Representatives passed a version of tax restructuring legislation that leaves CUs’ current franchise tax exemption intact. The Texas House passed HB 3, the “Property Tax Relief Bill” March 15 by a vote of 73-68, with four legislators who were present but not voting. In its original form, HB 3 – which was put on the House emergency calendar March 9 -lowered the state’s property tax and eliminated the state franchise tax which credit unions have been exempt from paying. The measure called for the franchise tax to be replaced with a payroll tax of 1.15% on base wages for all full- or part-time employees up to $90,000 annually, with virtually no exemptions. An amendment preserving credit unions’ tax exempt status was subsequently introduced and passed by the Texas House. According to the Texas Credit Union League, the amendment to HB 3 was introduced “in an effort to gain votes” for the bill’s passage. Under the amendment, businesses would be allowed to choose which tax system they would operate under – either the existing franchise tax – which CUs are exempt from – or the proposed payroll tax system. TCUL President/CEO Dick Ensweiler said under the state’s original franchise tax system, only 40% of Texas businesses have been paying taxes. The legislature, he said, “has been trying to close a bunch of loopholes that businesses have been able to use.” HB3 now goes to the Texas Senate where the TCUL says credit unions have “a number of strong allies” including Lt. Gov. David Dewhurst. Ensweiler said he is delighted by the passage of HB 3. “We had a phenomenal lobbying effort headed by (Texas Credit Union League SVP of Advocacy) Buddy Gill and the entire advocacy team. We generated more than 12,000 phone calls, e-mails and letters to state reps. It was a tremendous grassroots effort and it really made a difference.” Gill commended Texas CUs for “rallying quickly on short notice to contact their state representatives.” He also applauded lawmakers for maintaining CUs’ franchise tax exemption “as they wrestle with public school finance reform.” Gill said, “Policymakers understood that many Texas state-chartered credit unions, if faced with a decision to pay state sales taxes plus a new payroll tax, would likely switch to a federal charter to avoid paying these new business taxes applied to not-for-profits. An independent estimate said this could net cost the state more than $5 million in lost sales tax revenue and anticipated payroll revenue, a net loss to the state precisely at a time when the state seeks more money to fund education.” -

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