Some May Qualify To Trade Development Credits

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NCUA said federal credit unions may qualify for participation in a U.S. Treasury program buying and selling community development tax credits, but under very limited conditions.

A federal credit union, like some state charters, could qualify as a Community Development Entity, and then join the New Markets Tax Credit Program. But it may only buy and sell loans to other CDEs if those activities are "incidental" to an FCU's business, NCUA said in a new legal opinion letter.

However, if NCUA approves business lending for CUSOs, as expected, a credit union may choose to participate in the tax credit program through a CUSO. That could allow the CUSO to trade the new market tax credits, as well, as long as the majority of the business serves credit unions or their members, NCUA said.

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