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Charitable Donations Rule Proposed; NCUA Board Simplifies and Clarifies Fixed Assets Ownership Rule
Friday, September 13, 2013 6:40 AM

The National Credit Union Administration (NCUA) Board convened its eighth scheduled open meeting of 2013 at the agency’s headquarters here today. The Board unanimously approved a proposed rule to allow federal credit unions to create and fund charitable donation accounts to facilitate charitable activities by credit unions, and a final rule streamlining the regulation of federal credit unions’ ownership of fixed assets.

NCUA’s Board has long recognized that making charitable donations is a desirable and appropriate activity for federal credit unions, and the new proposed rule (Parts 703 and 721) would allow credit unions, under certain circumstances, to fund charitable donation accounts.

Charitable donation accounts are hybrid charitable and investment vehicles that primarily benefit charity. Through charitable donation accounts, federal credit unions would be able to make investments that are otherwise prohibited, because of the primarily charitable purposes.

The proposed rule would allow federal credit unions to invest in charitable donation accounts while creating safeguards to ensure the donations are used for their intended charitable purposes. The proposed rule contains several requirements for federal credit unions that invest in these accounts, including:

  • The primary purpose of the accounts must be to generate funds for tax-exempt charities chosen by credit unions.
  • The total investment in all such accounts must be limited to three percent of the credit union’s net worth for the duration of the accounts.
  • A minimum of 51 percent of the total return from such an account must be distributed to one or more qualified charities.
  • Distributions must be made to qualified charities no less frequently than every five years.
  • Assets of these accounts must be held in segregated custodial accounts or special purpose entities regulated by the Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission or other federal regulatory agency.

Comments on the proposed rule, available here, must be received within 30 days of publication in the Federal Register.

At yesterday’s meeting, the Board also finalized an amendment to the rule on federal credit unions’ ownership of fixed assets (Section 701.36). The changes simplify and clarify the existing regulation. The rule does not make substantive changes to the regulation or impose new requirements for fixed assets.

NCUA’s fixed assets rule allows federal credit unions to purchase, hold and dispose of property necessary or incidental to their operations. These fixed assets include office buildings, branch facilities, furniture, computer hardware and software, ATMs and parking lots.

A key provision of the amended rule offers greater flexibility to federal credit unions. Those that receive a waiver from the five percent fixed assets limit will have the ability to make multiple purchases of fixed assets within a one percent buffer above their approved waiver limit. This change is intended to eliminate the need for a federal credit union to make repeated waiver requests for minor acquisitions.

In keeping with the Plain Writing Act of 2010, the rule revises the regulation for clarity and readability. The rule also reorganizes existing definitions and adds new definitions for the terms “partially occupy” and “unimproved land or unimproved real property.” The changes clarify a potentially confusing aspect of the current regulation.

The final fixed assets rule, available online here, will be effective 60 days from the date of publication in the Federal Register.