November 28, 2006

Robert H. Dickman, Esquire

Robert H. Dickman, P.C.

Suite 1204, Two Penn Center Plaza

1500 J.F. Kennedy Boulevard

Philadelphia, PA 19102-1721

Re: Political Activities of Credit Unions.

Dear Mr. Dickman:

You requested guidance regarding the extent to which credit unions may
engage in political activity, specifically whether they may host events
in support of particular congressional candidates. Although federal
credit unions (FCUs) qualifying under the Regulatory Flexibility Program
(RegFlex) may make donations without regard to the limitations in NCUA's
charitable donations rule, limits in the Federal Election Campaign Act
(FECA), 2 U.S.C. §431 et seq., and regulations implemented by the
Federal Elections Commission (FEC) prohibit credit unions from direct
political contributions in connection with elections. Permissible
political activity includes establishment and administration of
separately segregated funds (SSFs) and limited sponsorship of
fundraising events, subject to reimbursement by an SSF.

FCU political activities are specifically subject to NCUA regulations
only to the extent they involve donations; however, FCU political
activities are otherwise subject to FEC rules and regulations, as well
as applicable state and local laws. The FEC administers, interprets, and
enforces FECA.

We are providing this general overview of NCUA and FEC regulations on
this issue but please note that NCUA does not have jurisdiction over
FECA issues. You should consult the FEC Office of General Counsel for
information concerning its guidelines.

***NCUA***

NCUA rules state FCUs may make charitable contributions or donations to
a nonprofit or tax-exempt organization operating primarily to promote
and develop credit unions, if it is in the best interest of the FCU and
the board of directors approves it. 12 C.F.R. § 701.25. This provision
does not permit direct donations or endorsements for a particular
candidate. An exception is made for FCUs that qualify for RegFlex. 12
U.S.C. §742.1. RegFlex designation exempts FCUs from several NCUA
regulatory restrictions, including those governing charitable donations.
12 U.S.C. §742.4(a)(1). Circumstances for automatic qualification can be
found at 12 U.S.C. §742.2. For state-chartered credit unions, you should
contact the appropriate state supervisory agency to determine the
permissibility of donations.

***FEC Rules for Political Contributions***

Credit unions are regulated under FEC guidelines for corporations. FECA
prohibits credit unions from making "a contribution or expenditure in
connection with any election to any political office, or in connection
with any primary election or political convention or caucus held to
select candidates for political office," 2 U.S.C. §441b; *see also* 11
C.F.R. §114.2. Credit unions may instead establish an SSF, more commonly
known as a political action committee (PAC). The two terms are
interchangeable. Individual credit unions may form their own SSFs, but
may also affiliate with other SSFs to form a larger aggregate. Please
refer to the FEC Guide for Corporations for details regarding
affiliation with other SSFs. See also FEC's Advisory Opinions 2004-41,
2000-15, and 2000-4, available on the FEC website.

An SSF is a separate account, with its own taxpayer identification
number, to which a credit union's members may contribute funds so that
the SSF may act politically on behalf of the members. Under FEC rules, a
credit union may pay for the establishment and administrative costs
associated with an SSF, however, it may not contribute money directly to
the fund. Member contributions to an SSF must be voluntary and must not
be derived from dues obtained as a condition for membership in the
credit union or a commercial transaction. If an SSF or its sponsoring
credit union wants to solicit contributions, it may only solicit credit
union members, personnel, and the families of both groups, subject to
FECA. The general public may not be solicited; however, a credit union
or SSF may accept funds from the general public, subject to FECA.

An SSF must, at the minimum, have a treasurer to perform administrative
duties. Additional staff members are permissible, but not necessary.
Staff members are regarded as employees of the credit union. Their
responsibilities may be limited to duties associated with the SSF, but
this is not mandatory. The treasurer may be held personally liable for
any violations of FECA or FEC regulations. Please review the FEC's
Brochure on Committee Treasurers, also available on the FEC website.

***Fundraising and Supporting Candidates***

SSFs may support and make contributions to individual candidates and
their campaign committees, subject to FEC limits. Though political
activities generally are reserved to the SSF, FEC regulations allow
credit unions to pay certain costs associated with fundraising events.
In the event a credit union is permitted to host a fundraising event and
the cost of the event exceeds one-third of the amount raised in
contributions, the SSF may have to reimburse the credit union for the
difference. 11 C.F.R. 114.5(b)(2).

***Conclusion***

FEC regulations rarely allow credit unions to participate directly in
partisan politics; political activity is generally performed by an SSF.
It is important to note NCUA does not have jurisdiction over FECA
issues. For further information, we suggest you contact: the Office of
General Counsel, Federal Election Commission, 999 E Street, NW,
Washington, DC 20463, telephone: (800) 424-9530, or online at
[www.fec.gov](http://www.fec.gov/). Please refer to the FEC "Campaign
Guide for Corporations and Labor Organizations," available on FEC's
website. You may also wish to consult the Pennsylvania Credit Union
League regarding state election rules.

Sincerely,

/s/

Sheila A. Albin

Associate General Counsel

OGC/AMT:bhs

06-0928