Bank bill giving tax exemption is shelved

Lawmakers shelved a bill Tuesday that would have given Utah banks an exemption from corporate franchise and income taxes.

By a 7-6 margin, the Utah House Revenue and Taxation Standing Committee voted to hold HB227 in committee, effectively putting the bill in stasis until or if they choose to bring it up for consideration again.

The bill's sponsor, Rep. Wayne Harper, R-West Jordan, said HB227 was another approach to try to "level the playing field" between banks and credit unions.

"As we're taking a look at financial institutions in the state of Utah, certain financial institutions are exempt from corporate tax on the state and federal level," he said. "Others — banks and other places like that — are not. Some are subject to sales tax, others are not. This proposal . . . goes through and levels the playing field, if you will, and establishes a tax treatment of equity between all financial institutions in the state of Utah."

Whether that's actually the case wasn't clear. Harper couldn't say whether the bill would affect mutual savings banks or industrial loan banks, for example.

Still, HB227 had its supporters, including the Utah Taxpayers Association and, perhaps curiously, the Utah League of Credit Unions.

"We're supportive of the removal of the corporate franchise tax on any institution, any business," Scott Simpson, president of the league, said after the meeting. "And we're supportive of the bankers if they're truly attempting to figure out their own regulatory path. But I think what we're seeing is that they are not concerned with their own taxation. They're concerned about us in the marketplace. If it were a pure taxation issue, they'd be lobbying extra hard for this bill."

Howard Headlee, president of the Utah Bankers Association, publicly thanked Harper "for his thoughts on this issue" but testified that the answer to the real issues at hand were in HJR1, "A Joint Resolution Relating to Financial Institutions."

As of late afternoon Tuesday, HJR1 remained in the Senate Rules Committee, where it was sent after being passed by the House. The resolution urges the U.S. Congress to address taxation and regulation issues related to credit unions.

"We are pleased that the House passed a resolution (HJR1) urging Congress to address that significant component of the inequity," Headlee said. "We believe that when that is addressed at a federal level, then our tax laws can piggy-back federal tax laws and the whole inequity can be addressed — the broader inequity, which is much more significant at a federal level."

Harper said HB227 was actually "an acceleration" of another bill he sponsored, HB78, which seeks to phase out the corporate income tax by 2012. That bill was approved by the revenue and taxation committee on Jan. 26 and is awaiting debate on the House floor.

Rep. Gordon Snow, R-Roosevelt, moved to hold the bill until HB78's fate is known. That bill, Snow said, is "broader and more comprehensive" than HB227 and may cover much of the same ground if passed.

"As the bill is in committee, we can always move it forward when that time comes," Snow said.

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