Many contribute to society through charitable deeds and that is not to be taken lightly. Whether you volunteer at your local church’s food pantry or donate to panhandlers with exceptional violin technique at your local shopping center, it is important that we give back.
My contribution to society is that I keep secrets. I will never tell my parents that it was my brother who took the new lawnmower for a joyride and killed the flower garden that one time. I will take it to the grave because almsgiving is extremely important.
So, what if federal credit unions want to engage in charitable acts? Can they too receive the warm and fuzzy feeling of paying it forward?
Generally, the first place to look for authority is within the Federal Credit Union Act (FCU Act). As you may be aware the FCU Act gives FCUs permission to perform certain activities. These powers are split into two categories: express and incidental powers. While express powers are listed within the Act, incidental powers, which shall be necessary or requisite to enable it to continue effectively the business for which it is incorporated, are detailed within NCUA’s rules and regulations.
Within its incidental powers, a federal credit union has the power to make charitable donations and hold charitable donation accounts. So yes, the warm and fuzziness of giving back is available to federal credit unions, as well.
This NCUA letter specifically speaks to the formation of charities:
“We believe an FCU may establish a nonprofit charitable foundation as a vehicle for its charitable giving under the same incidental powers authority under which an FCU makes charitable donations. 12 U.S.C. §1757(17); 12 C.F.R. Part 721. An FCU also may donate its employees’ time to the foundation just as it may make reasonable donations of money or other credit union resources. Both the Office of the Comptroller of the Currency and the Office of Thrift Supervision have long permitted banks and thrifts to establish charitable foundations under their express or incidental powers. 12 C.F.R. §7.7445 (1985); 1992 OTS Lexis 76 (Nov. 12, 1992). By creating a nonprofit charitable foundation, an FCU can charter a foundation focusing specifically on the FCU’s charitable goals, while promoting the FCU’s name in the community and generating goodwill.”
Thus, through its charitable donation’s incidental power, a federal credit union has the authority to form a separate legal entity for charitable purposes.
Another important takeaway from this letter is that while the charitable foundation is its own legal entity, “the foundation will be expected to maintain its tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and a separate corporate existence from the FCU,” the foundation is still subject to NCUA examination. “Like other charitable donations, an FCU’s contributions to a charitable foundation are subject to supervisory review during the examination process. Such contributions must be reasonable given the size and financial condition of the FCU and in the best interests of the FCU.”
A federal credit union which forms a charitable organization under its incidental powers should consult with local counsel to ensure its foundation’s policies and important documents are readily available for examiner review.