Current through Register Vol. 39, No. 6, September 16, 2024
(a)
A credit union may make charitable contributions and donations or may fund a
charitable donation account. The following definitions apply throughout this
Rule:
(1) "Charitable contributions and
donations" means gifts provided by credit unions to assist others through
contributions of staff, equipment, money, or other resources. This definition
includes donations to community groups, nonprofit organizations, other credit
unions or credit union affiliated causes, political donations, or donations to
create charitable foundations.
(2)
"Charitable donation account" ("CDA") means a hybrid charitable and investment
vehicle that a credit union may fund as a means to provide charitable
contributions to qualified charities.
(3) "Qualified charity" means a charitable
organization or other non-profit entity that serves either a charitable,
social, welfare, or educational purpose, and recognized by section 501(c)(3) of
the Internal Revenue Code as tax exempt.
(4) "Total return" means the actual rate of
return on all investments in a CDA over a given period of up to five years,
including realized interest, capital gains, dividends, and distributions, but
exclusive of account fees and expenses.
(b) A credit union seeking to make charitable
contributions and donations shall adopt policies and procedures as approved by
its Board of Directors.
(c) A
credit union shall be allowed to fund a CDA only after it has satisfied the
following:
(1) Notice. The credit union shall
send written notice of the type and amount of initial investment to the
Administrator 10 days prior to funding the CDA.
(2) Rating. The credit union shall be rated a
CAMEL 1, 2, or 3.
(3) Maximum
aggregate funding. The total aggregate investment in CDAs shall be limited to
five percent of the applicant credit union's net worth for the duration of the
CDAs, as measured every quarterly Call Report cycle.
(4) Segregated account. The assets of a CDA
shall be held in a segregated custodial account or special purpose entity and
shall be labeled as a CDA.
(5)
Regulatory oversight. If a CDA is established using a trust vehicle, the trust
shall be a revocable trust and the trustee shall be an entity regulated by a
state financial regulatory agency or a federal regulatory agency. A regulated
trustee, other person, or entity that is authorized to make investment
decisions for a CDA (manager), other than the credit union itself, shall be
either a Registered Investment Adviser with the U.S. Securities and Exchange
Commission or regulated by the Office of the Comptroller of the
Currency.
(6) CDA documentation and
other written requirements. The parties to the CDA shall document the terms and
conditions controlling the CDA in a written agreement. The terms of the
agreement shall be consistent with this Rule. A credit union's board of
directors shall adopt written policies governing the creation, funding, and
management of a CDA that are consistent with this Rule, review the policies
annually, and may amend them. A CDA agreement and policies shall at a minimum:
(A) provide that the CDA will make charitable
contributions and donations only to qualified charities;
(B) document the investment strategies and
risk tolerances the CDA trustee or other manager shall follow in administering
the account;
(C) provide that a
credit union shall account for the CDA, including distributions to charities
and liquidation of the CDA, in accordance with generally accepted accounting
principles; and
(D) state the
frequency with which the trustee or manager of the CDA will make distributions
to qualified charities that are consistent with Subparagraph (c)(7) of this
Rule.
(7) Minimum
distribution to charities. A credit union shall distribute a minimum of 51
percent of the CDA's total return to one or more qualified charities no less
frequently than every 5 years.
(d) Upon termination of a CDA, regardless of
the length of its term, a minimum of 51 percent of the CDA's total return on
assets shall be distributed to one or more qualified charities. Following the
distributions to the qualified charities, any remaining assets shall be
distributed to the credit union either in cash or shall be distributed to the
credit union in kind but only if those assets are permissible investments for
State-chartered credit unions as set forth in Rule .1201 of this Subchapter and
G.S. 54, Article 14I.
(e) The
Administrator may revoke or modify a previously funded investment to the
applicable credit union, if the Administrator finds the previously authorized
investment is no longer a safe and sound practice, or has become inconsistent
with applicable State or federal law. The Administrator shall send written
notice of the revocation or modification to the applicable credit union. A
credit union may appeal for a final decision by the Administrator as set forth
in 04
NCAC 06B .0501 of this Chapter.
Authority
G.S.
54-109.12;
54-109.21(19);
54-109.21(20);
Eff. April 1, 2019.
