Do federal credit unions have to pay Virginia's tax on electricity consumers, including the local share?

Plain-English summary

State Corporation Commission Chairman Mark Christie asked AG William Mims a clean federal-preemption question. Virginia Code § 58.1-2900 imposes a tax on consumers of electricity in the Commonwealth, split between a state-level component and a locality-level component that is remitted back to the city or county where the consumer is located. Federal credit unions are creatures of federal statute. Under 12 U.S.C. § 1768, Congress exempts federal credit unions, their property, franchises, capital, reserves, surpluses, other funds, and income from "all taxation now or hereafter imposed by the United States or by any State, Territorial, or local taxing authority," with one carve-out: real and tangible personal property may be taxed to the same extent as other similar property. Was Virginia's consumer-utility tax inside or outside that broad exemption? And if outside it, was the local portion treated differently? And how should a utility billing department identify a federal credit union when applying the exemption?

The AG worked through it as follows. A 1971-72 AG opinion had already addressed credit union taxation under § 1768, concluding that federal credit unions are subject only to real and tangible personal property taxes. The consumers' utility tax under § 58.1-2900 is not a tax on property; it is a tax on consumption of electricity. So § 1768's broad exemption applied, and the credit union was exempt from both the state and local components. That conclusion mirrored a separate prior AG opinion holding that federal credit unions are exempt from local utility taxes on telephone service.

On identification, federal regulation (12 C.F.R. Part 701, Appendix B, § VI) requires that "[t]he last three words in the name of every credit union chartered by [the National Credit Union Administration] must be 'Federal Credit Union.'" That naming rule gave utility billers a simple way to identify which accounts qualify for the exemption.

Currency note

This opinion was issued in 2009. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current § 58.1-2900 and § 1768 texts before relying on any specific rule.

Common questions

Q: What is the scope of 12 U.S.C. § 1768?
A: It exempts federal credit unions and their property, franchises, capital, reserves, surpluses, other funds, and income from all federal, state, territorial, and local taxation, with the one carve-out for real and tangible personal property.

Q: Why doesn't the consumer-utility tax fall within the property-tax carve-out?
A: Because the consumer-utility tax is imposed on consumption of electricity, not on the credit union's property. The carve-out only allows real and tangible personal property taxes.

Q: Does the same logic apply to state-chartered credit unions?
A: No. Section 1768 only protects federal credit unions. State-chartered credit unions take their tax treatment from state law, which is a different inquiry.

Q: How does a utility know whether a customer is a federal credit union?
A: By name. Federal regulations require federal credit unions to include "Federal Credit Union" as the last three words of their corporate name. State-chartered credit unions cannot use that phrase.

Background and statutory framework

12 U.S.C. § 1768 is the federal credit union tax exemption. It dates to the 1934 Federal Credit Union Act and has been amended since. Section 58.1-2900 of the Virginia Code imposes the consumer utility tax. The opinion connects two well-settled propositions: federal credit unions get the § 1768 exemption from non-property taxes, and a consumer utility tax is not a property tax. Earlier Virginia AG opinions had reached the same combined conclusion for telephone-service utility tax.

The opinion is short because the law was clear. Its useful contribution is the identification rule: federal regulation requires the "Federal Credit Union" suffix, so the utility's exemption desk does not have to investigate the charter to apply the law correctly.

Citations

• 12 U.S.C. § 1768 (federal credit union tax exemption)
• 12 C.F.R. Part 701, App. B, § VI (mandatory "Federal Credit Union" name suffix)
• Va. Code Ann. § 58.1-2900 (consumer electricity tax)
• 1971-1972 Op. Va. Att'y Gen. 393 (federal credit unions subject only to property taxes)
• 1972-1973 Op. Va. Att'y Gen. 394 (consumer utility tax not a property tax)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2009/09-080-Christie.pdf

Original opinion text

COMMONWEALTH OF VIRGINIA
Office of the Attorney General
William C. Mims

900 East Main Street
Richmond, Virginia 23219
804-786-2071

Attorney General

December 10, 2009

The Honorable Mark C. Christie
Chairman, State Corporation Commission
1300 East Main Street
Richmond, Virginia 23219-3630

Dear Commissioner Christie:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented

You ask whether 12 U.S.C. § 1768 exempts federally chartered credit unions from the tax on consumers of electricity imposed by § 58.1-2900 of the Virginia Code. If federal credit unions are exempt from the tax, you ask whether the exemption reaches the portion of the tax remitted to localities and how such exempted credit unions should be identified.

Response

It is my opinion that 12 U.S.C. § 1768 exempts federal credit unions from the tax on consumers of electricity imposed by § 58.1-2900, including the portion of the tax remitted to localities. It further is my opinion that a federally chartered credit union may be identified by its name, which is required to include the words "Federal Credit Union."

Applicable Law and Discussion

Section 58.1-2900(A) imposes "a tax on the consumers of electricity in the Commonwealth" and includes both a portion payable to the state and the applicable locality. Pursuant to 12 U.S.C. § 1768, Congress exempts federal credit unions from certain taxes:

The Federal credit unions organized hereunder, their property, their franchises, capital, reserves, surpluses, and other funds, and their income shall be exempt from all taxation now or hereafter imposed by the United States or by any State, Territorial, or local taxing authority; except that any real property and any tangible personal property of such Federal credit unions shall be subject to Federal, State, Territorial, and local taxation to the same extent as other similar property is taxed.

A 1971 opinion of the Attorney General (the "1971 Opinion") considered whether a federal credit union is exempt from state and local taxes under § 1768.[1] The 1971 Opinion concluded that federal credit unions are subject only to real and personal property taxes.[2] A consumers' utility tax is not a tax upon property.[3] Therefore, I must conclude that Congress has exempted federal credit unions from the tax imposed by § 58.1-2900 on consumers of electricity, including both the state and local portions. This is consistent with a prior opinion of the Attorney General which concluded that federal credit unions are exempt from local utility taxes imposed on consumers of telephone services.[4]

Finally, you inquire concerning the identification of federal credit unions. I note that federal regulation requires a federally chartered credit union to identify its status by including the words "Federal Credit Union" in its name.[5]

Conclusion

Accordingly, it is my opinion that 12 U.S.C. § 1768 exempts federal credit unions from the tax on consumers of electricity imposed by § 58.1-2900, including the portion of the tax remitted to localities. It further is my opinion that a federally chartered credit union may be identified by its name, which is required to include the words "Federal Credit Union."

Thank you for letting me be of service to you.

Sincerely,

William C. Mims

1. See 1971-1972 Op. Va. Att'y Gen. 393.
2. Id. at 393.
3. See Op. Va. Att'y Gen.: 1972-1973 at 394, 395; 1971-1972 at 419, 420.
4. See 1972-1973 Op. Va. Att'y Gen., supra note 3, at 395; see also 1984-1985 Op. Va. Att'y Gen. 327, 327 (concluding that federal credit unions may be subject to local real and personal property taxes, but not local business license taxes).
5. See 12 C.F.R. Part 701, App. B, § VI (2009) (mandating that "[t]he last three words in the name of every credit union chartered by [the National Credit Union Administration] must be 'Federal Credit Union'").