Credit unions that make loans of $50,000 or more to help musicians buy instruments have to change their tune and consider them member business loans.
NCUA Deputy General Counsel Hattie Ulan gave that message in a legal opinion letter to Bob McGrew, general manager of the $4.5 million, 906-member Houston Musicians Federal Credit Union in Texas.
Even though the IRS doesn't consider interest on these loans to be tax deductible, it's the loan's "actual purpose and amount, absent any applicable exemptions, that determine whether the loan is an MBL,'' Ulan wrote.
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She also suggested that the credit union consider asking the NCUA whether it is qualified for an exemption from the aggregate limit on member business loans either by noting that it was chartered for the purpose of making MBLs or because it is a credit union that primarily makes MBLs.
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