SEATAC, Wash.–The GoWest Credit Union Association is saying Washington State’s bankers have no reason to celebrate a bill that taxes credit unions that purchase banks in the state.

As the CU Daily reported here https://thecudaily.com/bill-in-washington-state-would-impose-taxes-on-cus-that-buy-banks/, legislation that removes the business and occupation (B&O) tax exemption that state-chartered credit unions currently have in place when acquiring community banks. The tax would be 1.2% of the credit union’s gross income, with supporters of the legislation saying it closes a “tax loophole by making credit unions that acquire banks subject to the same B&O tax as banks.”

The bill now awaits the governor’s signature to become law. 

The Community Bankers of Washington has been a strong supporter of the legislation, noting that in 2024 25% of all credit union acquisitions of community banks in the country happened in Washington State, “driven, in part, by credit unions’ nonprofit and tax-exempt status.”

‘Surprising’ Response

But the GoWest Credit Union Association says there is a bigger picture the bank group is overlooking.

“It’s surprising to see representatives of Washington banks celebrate a session that saw historic tax increases for banks of all sizes,” the GoWest Association said in a statement to the CU Daily. “Bills passed this session aimed at closing a massive budget deficit will see small local community banks experience a 20% tax increase, mid-size and regional banks’ taxes increase by 48%, while Wall Street banks will become the highest taxed entities in the entire state paying nearly double the business tax rate.  

“On top of the new tax bills, the Legislature repealed a $200 million tax exemption for community and regional banks in a bill the Washington Bankers Association supported.

‘Sold to Out-of-State Banks’

“While bankers cite the rare occurrences when a Washington bank chose to sell to a credit union, more than 80% of Washington bank assets have already been sold to other banks in the last decade and have gone out-of-state, greatly outpacing the national average and reducing local access to banking services,” the GoWest CU Association continued. “In attempting to address unprecedented state fiscal challenges, legislators ultimately created a de facto ban on credit unions buying banks, since no transactions will occur as a result, and no tax will be levied on a credit union. Banking representatives in response have expressed concerns that this policy, coupled with major cost increases to small community banks, will further reduce their value since they will have fewer if any options when choosing to or if forced to sell in the future.”

Value of CUs is Cited

The GoWest CU Association said that while taxes increased for other financial institutions, the legislature has recognized the “tremendous value” credit unions provide to the Evergreen State’s 5.5-million CU members. 

“In reality, taxing bank sales to credit unions means no sales, which was an unfortunate decision that will impact access to financial services for some individuals and communities in the future currently served by community banks,” the association said. “That said, Washington’s credit unions have risen to the challenge of filling gaps left by banks in the past and are prepared to continue that well into the future.”