BIRMINGHAM, Ala. (2/23/12)--Alabama credit unions would be eligible to accept municipal deposits under a bill recently introduced to the Alabama legislature.
The bill, sponsored by the League of Southeastern Credit Unions (LSCU), was originally referred to the state House Financial Services Committee and to the Senate Governmental Affairs Committee.
The Senate bill has been re-assigned to the Senate Banking and Insurance Committee, an effort on the part of the banks to fight the bill, according to LSCU.
"[Banks] felt moving the bill to that committee presented them with their best chance to defeat the measure," said Jason Cochran, LSCU director of legislative affairs.
Commercial banks maintain that credit unions should not serve local government because of they do not pay taxes, the league noted in a bulletin urging state credit unions to contact members of the state legislature. Credit unions do pay tangible personal property taxes, real property taxes, and as employers, credit unions pay all employment taxes, according to the league. Credit unions' tax status lies in their not-for-profit structure, including cooperative ownership and volunteer leadership, the league maintains.
"Our tax status and whether or not credit unions can accept municipal deposits … obviously those are dots that we feel cannot be connected," Cochran said.
Municipalities could receive better rates of return on their tax dollars if they were allowed to deposit public funds in credit unions, which on average, pay out 0.25 to 0.50 basis points more than banks on deposit accounts, according to the league.