NCUA Proposes Rule Easing Credit Union Commercial Property Occupancy Rule

The Public Comment period closed yesterday on the National Credit Union Administration's (NCUA) proposed Rule amending its regulation governing federal credit union (FCU) property occupancy requirements. Presently, a FCU must plan for and eventually achieve full occupancy of any acquired commercial property. Under the proposed Rule, a FCU will be able to lease or sell excess capacity in its facilities, and it does not require that the FCU plan to occupy the entire space at some point in the future.

The NCUA reports that the comments it has received are largely supportive of the Rule. Those in support of this Rule argue that long term income from FCU premises would generate value for the membership, offset the cost of property ownership, and allow FCU's to acquire commercial space in a cost-effective manner, opening up access to property subject to mixed-use ordinances.

Those opposed to the Rule, the American Bankers Association (ABA) chief among them, argue it will encourage speculative real estate deals, increases membership exposure, and is inconsistent with the scope of credit union operations envisioned by Congress. The ABA's chief concern is that FCU's are not subject to Unrelated Business Income Taxes and would be incentivized to maximize leasing income by occupying the minimum amount of space allowed.

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