During California and Nevada’s Credit Unions monthly Advocacy Insider call, advocates heard a clear call to action: be prepared for a potential tax fight in Sacramento and/or Washington, D.C. Policy experts are cautiously optimistic that a significant threat to the credit union tax exemption is unlikely.
That outlook reflects strong grassroots and grasstops advocacy efforts across both coasts, as well as the “big picture” of the political state of play.
At the end of the first quarter, the California Legislative Analyst’s Office (LAO) released a report outlining 13 options to raise $1-3 billion annually, including increasing the corporate tax rate and eliminating certain tax expenditures.
One option would tax credit unions’ “non-member income,” such as ATM fees and investment income, which are currently exempt. This was not a proposal from a legislator, but rather from LAO staff developing recommendations on how to balance the budget.
The team at California’s Credit Unions swiftly acted by meeting with the LAO’s staff to discuss the proposal and share some inconsistencies in the report’s rationale. We also sent the enclosed letter to state legislative leaders outright opposing the proposal. The classification of “non-member income” shows a fundamental misunderstanding of the credit union structure as earnings support essential services and member benefits — not profits for shareholders.
From a grasstops perspective, advocates across the state will soon gather in Sacramento for the California Government Relations Rally (GRR). Attendees will hear directly from the LAO during the league’s programming and meet with legislators and staff to advocate on a few issues impacting credit unions. One of the talking points during the legislative visits will be on the LAO report and opposing any new taxes on credit unions.
You can read the GRR talking points here. If you have not registered for GRR, please do so here.
President Donald Trump recently announced that he expects Congress to pass a second budget reconciliation package no later than June 2026. The effort is not expected to directly impact credit unions at this time. However, any reconciliation package could serve as a vehicle for tax policy changes, including potential modifications to the credit union tax exemption.
On March 4, more than 300 credit union leaders engaged in grasstops efforts to protect the credit union tax exemption at the Governmental Affairs Conference (GAC). Advocates spoke about the credit union difference and how savings through the tax exemption are reinvested in local communities. This year, each legislator received a profile on the nonprofits that credit unions support in each member of Congress’s district.
Last year, Californians engaged in grassroots efforts by sending 300,000 messages to legislators on Capitol Hill. Messages to members of Congress sent a strong message: “Don’t Tax My Credit Union.” Success was achieved as multiple legislators from California publicly asked congressional leadership to protect the credit union tax exemption, which was ultimately protected in the tax package signed into law.
If you have not already, please subscribe to Connect for the Cause (CFTC). This platform empowers credit union advocates to send notes to legislators in Sacramento and Washington, D.C. on issues important to credit unions.
To stay up to date on updates in Washington, D.C. and Sacramento, please register for our Advocacy Insider call. These calls are hosted once a month at 9 a.m. (Pacific), typically on Thursdays.
