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NCUA Issues Final Rule on Charitable Donation Accounts

In its December 12 meeting, the National Credit Union Administration (NCUA) Board adopted a final rule regarding charitable donation accounts (CDA), the creation of which the Missouri Credit Union Association (MCUA) strongly supports. MCUA sent a comment letter on October 21. The rule would allow federal credit unions to create and fund a CDA, a hybrid charitable and investment vehicle, as an incidental power, provided the account is primarily charitable in nature and meets other regulatory conditions to ensure safety and soundness.

The final rule leaves the basic structure of CDAs in place. As in the proposed rule, a minimum of 51% of the total return from a CDA still must be distributed to one or more qualified charities at least once every five years. The CDA would be permitted to invest in otherwise impermissible investments, and at the end of the five year window, the initial investment amount could be returned to the credit union.

The agency made a number of changes. Notably, the net worth limit is raised from 3% to 5%, which must not be exceeded throughout the life of the account. NCUA also removed the potentially redundant regulatory oversight requirement of having trust vehicles supervised by the OCC also supervised by the SEC.

The rule will be effective once published in the Federal Register, which we expect will be next week.

 

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