Because credit unions are considered financial cooperatives, the institutions are exempt from federal income tax. Individual members are taxed on their dividends. Credit union loan and investment powers are more restrictive than commercial banks. Credit unions can only make loans to their members, to other credit unions, and to credit union organizations. Generally, the loan maturities cannot exceed twelve years.
Credit unions can invest in government or government- guaranteed financial instruments.
The federal regulator, the NCUA, is an independent government agency. A three-member board, appointed by the President with the advice and consent of the Senate, manages the agency. NCUA is responsible for chartering, insuring, and examining federal credit unions. State regulators have primary supervisory authority over federally insured state- chartered credit unions. They work in cooperation with the NCUA to ensure that these institutions meet safety and soundness standards.