Sunday, April 1, 2018

Is Iowa Gound Zero for Credit Union Income Taxation

This is a good review  of the competing concepts in subjecting credits unions to income taxation, as it applies specifically to Iowa state taxation. Credit Unions are exempt from federal income tax but do pay payroll, sales and property taxes as well as, in Iowa, a tax on their reserves. Iowa credit unions argue Iowa banks control vastly more of the banking market than do credit unions and report profits orders of magnitude greater. This does not address the bankers 'fair share' position, that regardless, credit unions make millions of dollars in profit and should pay taxes accordingly. The bankers claim credit unions that make multi-million dollar business loans and purchase naming rights for stadiums have evolved far past the limited-membership cooperative banking institution providing small loans to those who would not qualify at banks. In Iowa particularly, at least one issue is a shortfall in state revenues the legislature is seeking to make up.

The bankers' argument is a little more difficult with reference to the proposed Iowa tax bill, because estimates are that it will raise credit union taxes but give banks a tax break. Credit union taxes would increase $3.1 million by 2023 but bank taxes would decrease $17.9 million by 2023. Further, Iowa banks are entitled to state tax credits which mean several Iowa banks pay no income taxes at all.

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