NCUA Letter: CUSO Owned Fixed Assets Do Not Count Against Fixed Asset Limit
Fixed assets owned by a CUSO do not count against the fixed asset limit at federally chartered credit unions, according to an NCUA legal opinion letter.
Legal opinion letter 11-0642 responded to a request for an opinion from a unnamed credit union that currently leases the first floor of a larger building which has the second floor leased to another organization. The CU wants to form a CUSO to buy the building and then lease the credit union the first floor space while continuing to lease the second floor to the unrelated organization.
“Under the fixed assets rule, an FCU with $1 million or more in assets cannot invest in fixed assets if the investment would cause the aggregate of all the FCU’s fixed assets to exceed five percent of the FCU’s shares and retained earnings,” the agency wrote in its letter. “The fixed assets rule previously required an FCU to include in its calculation of its investment in fixed assets, any investments in, and loans to, a partnership or corporation, including a CUSO, that holds any fixed assets used by the FCU. That requirement was eliminated in 2004. Lease payments are, however, included in the definition of fixed assets. Thus, FCU payments to the CUSO under its lease would be included in its fixed asset calculation.”
The agency also ruled that the building purchase and lease arrangement would not violate the fixed asset rule as the majority of the building would still be leased to the credit union.