Compliance Blog

May 31, 2023
Categories: Operations

NCUA Proposes Change to Open Donations to Veterans' Organizations

On May 25th, the NCUA Board approved a NAFCU-sought proposed rule to amend NCUA’s regulation on charitable donation accounts (CDAs) to allow donations to 501(c)(19) veterans’ organizations. Currently, the rule only permits donations to 501(c)(3) organizations. Because of the proposal, I thought it would be a good time for a refresher on CDAs.

NCUA regulation, section 721.3(b), permits a credit union to make charitable donations and create charitable donation accounts. Under the rule, a “charitable donation account (CDA) is a hybrid charitable and investment vehicle, satisfying the conditions in paragraphs (b)(2)(i) through (vii) of this section, that you may fund as a means to provide charitable contributions and donations to qualified charities.” In other terms, a CDA is like a charitable foundation but for credit unions. While credit unions are limited by Part 703 and the Federal Credit Union Act in what investments they can make, credit unions can make donations to a CDA, free from the investment limitations, if the credit union satisfies paragraphs 721.3(b)(2)(i) through (vii).

Paragraphs (b)(2)(i) through (vii) place the following requirements on a CDA:

1.     The aggregate book value of a credit union’s investments in all CDAs must be limited to 5% of the credit union’s net worth at all times, as measured in every quarterly Call Report cycle;

2.     The assets of a CDA are required to be held in a segregated custodial account/special purpose entity that must be identified as a CDA;

3.     If a CDA is established as a trust, the trustee must be regulated by the Office of the Comptroller of the Currency (OCC), the U.S. Securities and Exchange Commission (SEC), another federal regulatory agency, or a state financial regulatory agency;

4.     The terms and conditions that control the CDA’s account must be contained in a written agreement;

5.     At least one distribution must be made to a qualified charity every five years;

6.     Upon termination, 51% of the accounts total return on assets must be distributed to at least one qualified charity; and

7.     Upon termination, a credit union may receive a distribution of the remaining account assets in cash or may receive the assets if those assets are permissible investments under the FCU Act and Part 703.

One thing to note is that distributions must be made to a qualified charity. Under the current rule, a qualified charity is a charitable organization/non-profit entity recognized under section 501(c)(3) of the Internal Revenue Code. As noted above, the proposed rule would amend the definition of qualified charity to include 501(c)(19) organizations.

While the proposed rule only adds 501(c)(19) organizations to the definition of qualified charities, the proposal requests feedback on additional 501(c) organizations that commenters believe should be a “qualified charity.” In all, there are about 29 different types of 501(c) organizations. For example, NAFCU, as a trade association, is a 501(c)(6) organization, credit unions are 501(c)(14) organizations, and teachers’ retirement fund associations are 501(c)(11) organizations.

Credit unions that are interested in opening up the definition of qualified charity to other 501(c) organizations can submit comments through the following methods:

“Federal eRulemaking Portal: Follow the instructions for submitting comments on Docket NCUA-2023-0043.

Mail: Address to Melane Conyers-Ausbrooks, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314- 3428.

Hand Delivery or Courier: Same as mail address.”

If there are any remaining questions, please do hesitate to contact NAFCU’s Compliance team at


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About the Author

Keith Schostag, NCCO, Senior Regulatory Compliance Counsel, NAFCU


Keith Schostag joined NAFCU as regulatory compliance counsel in February 2021. In this role, Keith assists credit unions with a variety of compliance issues.

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