The National Credit Union Administration has issued a final rule easing restrictions on federal credit unions’ ability to acquire and lease commercial real estate and make speculative real estate investments. The rule eliminates a requirement for credit unions to achieve full occupancy of acquired premises.
Under the rule, credit unions will only be required to “partially occupy” acquired properties within six years of acquisition. The rule defines partial occupancy to mean “occupation and use, on a full-time basis, of at least fifty percent of the premises by the FCU, or by a combination of the FCU and a credit union service organization in which the FCU has a controlling interest in accordance with generally accepted accounting principles.”
ABA has strongly opposed this rule, pointing out that it would incentivize credit unions to maximize non-mission related income by leasing out its properties. Since FCUs do not pay unrelated business income taxes, the rule would incentivize credit unions to occupy only the minimum amount of space required under regulation and lease out the remaining area—a further abuse of the credit union tax exemption, the association said. ABA further noted that the rule also raises safety and soundness concerns for credit unions (and in turn, for the American taxpayer), as speculative investments leave FCUs open to operational and market risks.Email This Post