Two years ago, the Nevada Legislature passed a tax increase that seemed to unfairly single out the banking industry in the state.
The legislation required bankers to pay a 2 percent payroll tax – nearly triple the .7 percent rate paid by other employers, and the industry was also hit with a $7,000 tax for each bank branch. That branch tax has translated into hundreds of thousands in additional operating costs.
“Why should banks be singled out?” said Bill Uffelman, president of the Nevada Bankers Association. “We are employers and we provide good jobs, and it’s unfair.”
Convinced the tax increases were a terrible idea that ends up handcuffing the industry, the Nevada Bankers Association has set its sights on lobbying legislators to rethink the tax increases. Uffelman estimates the branch tax has raised about $1.8 million and the payroll tax put about $21 million in state coffers, and with Nevada now enjoying an estimated $300 million tax revenue surplus, it’s time to reinstate fairness in the way Nevada taxes it’s industry.
“The taxes are certainly a primary issue for us,” Uffelman said. “The surplus is probably going to be closer to half a billion, and if you can’t find $14 million or so to put the banks on the same playing field everyone else is on, then that’s troubling. There needs to be fairness and equity, and hopefully we’ll prevail when it’s all said and done.”
But repealing the tax isn’t the only issue on the table this year for the banking industry. Bankers also want Legislators to simplify the way funds are transferred from financial institutions when business customers in Nevada make bill payments over the phone. Such payments, financed through a process known as demand drafts, can be especially cumbersome for the Nevada banking industry because the process can vary from transaction to transaction.
“We are trying to make it more uniform,” Uffelman said. “We want to accomplish the goal – the group receiving the payment gets its payment – and the banks don’t have to jump through a lot of hoops to make sure it is done properly. About 15 states have adopted some version of it, including California.”
The Nevada Bankers Association, through its lobbying and mission of furthering the overall interests of the industry, has proven to be crucial to bankers in the Silver State over the years. Formed nearly a century ago in December 1908, the association now has some 45 institutions as members.
In addition to its lobbying efforts, the association also seeks to find a common ground between its members on the most crucial issues facing the industry.
One of those issues, Uffelman said, is leveling the playing field between credit unions and the traditional private banking industry.
Right now, Uffelman said credit unions are enjoying tax breaks that give them an unfair business advantage throughout the state. Just one example is the fact that credit unions are not required to pay the branch tax.
“You go to Caliente and the bank is at one end of town and the credit union at the other,” Uffelman said. “They are competing for the same customers, but at one end of town it costs you (thousands) more to open the door.”
But credit unions say that is simply incorrect. The tax structure and business playing field is currently fair because credit unions are non-profits set up for and controlled by their members. The Legislature realized this when they exempted credit unions from the branch tax in 2003.
“If bankers really believe the playing field is tilted in credit unions’ favor, they can always convert their banks to credit unions,” said Bruce Rodela, chairman of Nevada Credit Union League and CEO of Washoe Credit Union. “No bank has done that, because bankers know that they would be subject to all the restrictions credit unions face. Credit union can’t raise capital by issuing stock, they have volunteer boards of directors and they also face increased restrictions on loans and investments, among other regulations.”
Another item on the bankers association’s agenda is examining state law regarding identity theft to see if it needs to be strengthened. Uffelman said Nevada’s banks are also in the process of evaluating how to improve their own internal controls to prevent identity theft.
“It’s real,” Uffelman said of the problem. “We certainly are at the table, working on it, so that our customers are as protected as possible.”