| 
Credit unions in Iowa will not be subject to state taxes, a decision viewed as a victory for credit unions nationwide in the longstanding debate over whether they should be taxed like banks.
Iowa lawmakers last week passed a tax reform package that keeps the credit union tax exemption in place after a fierce battle between industry groups.
“The voice of the people was heard, and consumer choice wins over dollars in the pockets of bank shareholders. Iowa’s 1.1 million credit union members, along with all Iowa consumers, can continue to benefit from choice and competition,” Patrick Jury, president and CEO of the Iowa Credit Union League, said in a statement. “Amid continued consumer abuse by banks, this choice is needed more than ever. All consumers benefit from the competition that keeps rates and fees in check.”
The Iowa Bankers Association earlier this year launched a campaign advocating for the state to impose a franchise tax on credit unions.
The bill would have lowered the rate on the franchise tax to 2 percent for the first $7.5 million of net income, and to 4 percent on all net income above $7.5 million for all financial institutions in Iowa, including credit unions.
Bank advocates argued that credit unions should be paying their fair share, while credit union supporters said the tax would eliminate consumer choice and competition, and essentially give banks a tax break.
“CUNA, CUNA Mutual Group and a host of partners from across the credit union system were proud to stand with the Iowa Credit Union League and Iowa credit union advocates in waging this battle from day one,” Jim Nussle, president and CEO of the Credit Union National Association and an Iowa native, said in a statement. “While we expect these fights to continue as bankers push false narratives about not-for-profit, member-owned financial institutions, this is a moment to congratulate the excellent leadership of Pat Jury and the Iowa Credit Union League, and be proud of what our 360-degree advocacy offense and the CUNA/league system has accomplished.”
Though disappointed with the decision, the Iowa Bankers Association was pleased with its efforts.
“Even though the provision didn’t make it to the final bill, there was substantial progress made in raising awareness of this important issue and driving the issue forward,” the group said in a statement. “This issue is not going away, and the IBA will continue to work on this issue in preparation for the 2019 legislative session. Convincing the Iowa Legislature to implement tax equity for all financial institutions will require a continued statewide effort from Iowa bankers as well.”
Chris Howard, senior vice president at Callahan & Assoc., said in an opinion piece in the Credit Union Journal that the close battle is only a preview of what is to come.
“Unless we take control of our story, our facts and our language, the end of the credit union tax exemption isn’t a question of if, but of when,” he said. “We must act quickly, aggressively and with one clear voice to reclaim the narrative or the outcome in Iowa may prove to be a Pyrrhic victory.”
