August 28, 1997
Jessica A. Suro, Manager
Trenton Times Employees Federal Credit Union
500 Perry Street
Trenton, NJ 08618
Dear Ms. Suro:
You requested an opinion regarding the ability of a federal credit
union (FCU) to receive interest on a checking account it holds
at a federal savings bank. Federal savings banks can pay interest
on checking accounts only to individuals and certain nonprofit
entities. As defined by the Office of Thrift Supervision (OTS),
FCUs are not among the nonprofit entities qualifying for such
accounts.
A provision of the Federal Deposit Insurance Act permits FDIC-insured
depository institutions to pay interest or dividends on checking
accounts only to individuals and certain nonprofit entities.
12 U.S.C. �32(a). The Office of Thrift Supervision (OTS),
which regulates federal savings banks, has defined by regulation
those nonprofit entities that may receive interest or dividends
under 12 U.S.C. �32. They are entities that are operated
primarily for religious, philanthropic, charitable, or educational
purposes, as described in sections 501(c)(3) through (13), 501(c)(19),
and 528 of the Internal Revenue Code, I.R.C. Ё501(c)(3-13,
and19) and 528 (1996). 12 C.F.R. �1.29.
Although FCUs are tax-exempt under section 501(c)(1) of the I.R.C.,
I.R.C. �1(c)(1), they are not within the OTS definition
and may not receive interest or dividends on checking accounts
held at a federal savings bank. For your information, this is
also true for state-chartered credit unions, which are tax exempt
under section 501(c)(14) of the I.R.C., I.R.C. �1(c)(14).
The OTS Office of Chief Counsel confirmed this interpretation.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/MSC:bhs
SSIC 4660
97-0719
cc: Region II