California’s Credit Unions’ state advocacy team recently learned that a concerning proposal will be part of the state legislative budget deal coming out of Sacramento. The trailer bills can be found here: Senate Bill 176 and Senate Bill 122.

This proposal would tax digital software and services (SaaS). The budget trailer bill was amended Friday evening, and the California league submitted a letter opposing the bill shortly thereafter.

The proposal applies to all businesses in the state and is not unique to credit unions or financial services. The league has been working with fellow trade associations prior to the introduction of the bill to try to eliminate the proposal.

The league’s message has been clear: credit unions are not-for-profit financial cooperatives, and any new tax ultimately falls on credit union members through reduced services, less competitive rates, and fewer resources available for community investment. At a time when many Californians continue to face affordability challenges, this proposal moves in the wrong direction.

California’s Credit Unions has also emphasized the disproportionate impact on California state-chartered credit unions. Additional state tax burdens could place state-chartered institutions at a competitive disadvantage, weaken California’s dual-chartering system, and reduce consumer choice.

Additionally, the California league has reminded policymakers that this proposal represents a departure from California’s longstanding recognition of credit unions as member-owned cooperatives that exist to serve consumers, not generate profits for shareholders.

The budget process in Sacramento is moving quickly, and the league remains fully engaged in advocating on credit unions’ behalf.

If you have questions, please email Senior Vice President of State Advocacy Robert Wilson.