Washington State’s new tax on credit union–bank deals draws sharp backlash |
Washington state has introduced a first-of-its-kind tax on credit unions that acquire state-chartered banks, but critics say the move will effectively halt such mergers rather than raise revenue. The law, which took effect on January 1st, imposes a 1.2% business and occupation tax on the gross income of Washington-chartered credit unions that merge with Washington-regulated banks. Credit union advocates argue the tax makes these deals financially unviable, amounting to a de facto ban that will push mergers out of the state. Attorneys and trade groups say credit unions will either avoid acquisitions, convert to federal charters, or leave deals to out-of-state or federally chartered buyers, meaning the state is unlikely to collect any meaningful revenue. Banking groups support the measure, arguing it helps offset lost tax revenue when tax-paying banks are acquired by tax-exempt credit unions and levels the competitive playing field. However, critics warn the law could depress the value of community banks by shrinking the pool of potential buyers. Washington joins other states, including Mississippi and West Virginia, in tightening restrictions on credit union acquisitions of banks. Credit union groups say they will continue discussions with lawmakers, suggesting the policy debate is far from settled.
