LIABILITY OF CREDIT UNIONS FOR UNEMPLOYMENT COMPENSATION CONTRIBUTIONS
State‑chartered credit unions are liable for unemployment compensation contributions except where the remuneration paid to any employee does not exceed in any quarter the sum of $50.00 or where the service is performed by a student enrolled and regularly attending classes at a school, college or university.
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October 5, 1951
Mr. A. O. Kent, Supervisor
Division of Savings and Loan
State of Washington
Olympia, Washington Cite as: AGO 51-53 No. 144
Receipt is acknowledged of your letter of August 2, 1951, in which you ask the following question:
Are employees, whether part time or full time, of state‑chartered credit unions obligated for the unemployment tax and if so are they entitled to benefits, or on the other hand, may these same employees participate on an optional basis?
It is our conclusion that the employees are not subject to the tax, but state‑chartered credit unions are subject to the payment of unemployment compensation contributions upon their payrolls except in cases where the remuneration for any calendar quarter does not exceed $50.00 or where such service is performed by a student regularly attending classes at a school, college or university. Employees for whom the contributions are paid are entitled to the benefits of the Unemployment Compensation Act and employees of such credit unions who are not within the provisions of the unemployment compensation law may be brought within it by a voluntary election of coverage by the employer.
[[Orig. Op. Page 2]]
Chapter 35, Laws of 1945, as amended, makes no provision for any contribution by the worker to the unemployment compensation fund, but on the contrary, section 182 of that act (Rem. Rev. Stat. 9998-321) provides in part:
"No employer shall directly or indirectly make or require or accept any deduction from remuneration for services to finance the employer's contributions required from him, or require or accept any waiver of any right hereunder by any individual in his employ."
Thus, employees are not required under any circumstances to pay unemployment compensation contributions. All liability for contributions falls upon the employer.
There is no express exception of credit unions in the unemployment compensation statute; however, section 27 of chapter 35, Laws of 1945 (Rem. Rev. Stat. 9998-165) as last amended by section 1 of chapter 265, Laws of 1951 (RCW 50.04.260), provides in part:
"The term 'employment' shall not include service performed in any calendar quarter in the employ of any of the following organizations, if (1) the remuneration for such services is less than fifty dollars; or (2) such service is in connection with the collection of dues or premiums for a fraternal benefit society, order, or association and is performed away from the home office or is ritualistic service in connection with any such society, order, or association; or (3) such service is performed by a student who is enrolled and who is regularly attending classes at a school, college or university:
"* * *
"(d) domestic saving and loan associations substantially all the business of which is confined to making loans to members; and cooperative banks without capital stock organized and operated for mutual purposes and without profit; * * *"
[[Orig. Op. Page 3]]
This office in an opinion to the Director of Finance, Budget and Business dated November 5, 1943, a copy of which is attached for your information, advised that credit unions should be regarded as cooperative banks and should be subject to the exception contained in the section above quoted. That opinion contained the following conclusion:
"* * * that services performed for credit unions are not subject to contributions under the Washington Unemployment Compensation Act where remuneration for such services does not exceed $45.00, or where such services are performed by a student who is enrolled and who is regularly attending classes at a school, college or university."
The statute now has been amended to change the figure from $45.00 to $50.00. We reaffirm the conclusion reached in that opinion. In a previous opinion dated November 1, 1941, to the Director of Finance, Budget and Business, a copy of which is attached for your information, this office had held that state chartered credit unions were subject to liability for unemployment compensation contributions. That opinion was given prior to an amendment to Section 27 of the statute which contained the exception above noted.
It is our opinion that state chartered credit unions, unless they fall within the exception contained in section 27 above referred to, are liable for unemployment compensation contributions.
Your letter points out that Federal credit unions are not required to pay these contributions. The reason for this is that Federal credit unions are instrumentalities of the Federal government. They are made so by section 1767 of Title 12 of the United States Code which provides:
"Each Federal credit union organized under this chapter, when requested by the Secretary of the Treasury, shall act as fiscal agent of the United States and shall perform such services as the Secretary of the Treasury may require in connection with the collection of taxes and other obligations due the United States and the lending, borrowing, and repayment of money by the United States, including the issue, sale, redemption, or repurchase of bonds, notes, Treasury certificates of indebtedness, or other obligations of the United [[Orig. Op. Page 4]] States; and to facilitate such purposes the Governor shall furnish to the Secretary of the Treasury from time to time the names and addresses of all Federal credit unions with such other available information concerning them as may be requested by the Secretary of the Treasury. Any Federal credit union organized under this chapter, when designated for that purpose by the Secretary of the Treasury, shall be a depository of public money, except receipts from customs, under such regulations as may be prescribed by the Secretary of the Treasury."
Section 1768 of Title 12 of the United States Code expressly prohibits states from taxing Federal credit unions except upon their real and tangible personal property. State chartered credit unions are not made instrumentalities of the state and the only statutory provision relative to their taxation is section 34 of chapter 173, Laws of 1933, as last amended by section 26, chapter 131, Laws of 1943 (Rem. Rev. Stat. 3923-34) which provides in part:
"Neither a Credit Union nor its members shall be taxed upon its shares and deposits as property. A Credit Union shall be taxable upon its real property and tangible personal property, and every Credit Union shall be termed a mutual institution for savings and neither it nor its property shall be taxable under any law which shall exempt savings banks or institutions for savings from taxation. * * *"
There is no prohibition in this section against the levy of payroll taxes. Thus, Federal credit unions are exempt by Federal statute but there is no comparable exemption for state chartered credit unions.
To the extent that contributions are paid upon the remuneration paid to employees of state chartered credit unions, they may obtain benefits under the unemployment compensation statute if they become unemployed. The system of unemployment compensation is such that wage credits, which are the basis for unemployment benefits, accrue when an employer pays contributions, and such credits may be derived from wages paid by several employers. Thus, a full or part-time employee of a credit union may obtain, by reason of the contributions of the credit union, wage credits which will be available to him if he becomes totally or partially unemployed.
[[Orig. Op. Page 5]]
Under section 104 of chapter 35, Laws of 1945 (Rem. Rev. Stat. 9998-242) as last amended by section 8, chapter 265, Laws of 1951 (RCW 50.24.160), an employer may elect to bring within the provisions of the Unemployment Compensation Act any services that do not normally constitute employment as defined in the act. Under such a voluntary election, credit union employees who would not otherwise be within the coverage of the unemployment compensation law may be extended that coverage. Such election could be made by a credit union under its general powers as a corporation.
Very truly yours,
LYLE L. IVERSEN
Assistant Attorney General