Wednesday, May 16, 2018
Iowa CU Taxation Dead, For Now
Increased state taxation of Iowa credit unions is dead, for now. A recent bill would have imposed a tax of two percent on the first $7.5 million of annual profit and four percent for any beyond that on both banks and credit unions. However, the bill also included tax cuts for banks. The Iowa bill was popularly thought of as a tax cut bill, and this may have had an effect on the exclusion of the credit union taxation provision.
Credit unions are exempt from federal income taxes on the theory that they are owned by their members, not stockholders, who share a common bond such as an employer or geographic area, functioning primarily as a finance company for small consumer loans to their members. Recently, bankers claim, credit unions have abused their non-profit status by expanding their membership and product offering to mortgages, deposits, investments, etc., making credit union's non-profit status an unfair advantage.
Many viewed Iowa's consideration of credit union state income taxation a step toward changing credit union's non-profit status much further than any before. Because their credit union taxation provision was in a bill passed by the Iowa senate, something that had never happened, Iowa bankers claim they will continue attempting to push for more taxes on credit unions.