Washington Division of Credit Unions Interpretive Letter I-26-01 on Charitable Donation Accounts

State of Washington
DEPARTMENT OF FINANCIAL INSTITUTIONS
DIVISION OF CREDIT UNIONS
P.O. Box 41200 ⚫ Olympia, Washington ⚫ 98504-1200 Courier Address: 150 Israel Rd. SW ⚫ Tumwater, WA ⚫ 98501-6456 Telephone (360) 902-8701 ⚫ TDD (360) 664-8126 ⚫ (800) 372-8303 ⚫ FAX (360)704-6901 ⚫ http://www.dfi.wa.gov Division of Credit Unions Interpretive Letter I-26-01 Replaces Interpretive Letter I-14-04 DATE: March 26, 2026 TO: All Washington State-Chartered Credit Unions FROM: Amy B. Hunter, Director of the Division of Credit Unions RE: Charitable Donation Accounts Background Washington state-chartered credit unions have authority under RCW 31.12.402(20) to invest in charitable donation accounts (CDAs). Credit unions may request permission to invest funds in instruments not specifically listed in RCW 31.12.436 for the limited purpose of funding CDAs, similar to what federal credit unions may do under 12 CFR 721.3(b). The Washington Credit Union Act allows state-chartered credit unions to invest in CDAs if the investments comply with RCW 31.12.436 and RCW 31.12.402(20). The Division Director may approve investments beyond those listed in RCW 31.12.436(1) for the sole purpose of funding CDAs, subject to the conditions below. A credit union must submit a written application to the Director before making any investment not expressly permitted by RCW 31.12.436. The application must demonstrate that the CDA investment is safe and prudent. If the credit union has a CAMEL rating of 3, 4, or 5, the Division may require a special examination before deciding whether to approve, defer, or deny the application. If the Director does not act on a complete CDA application within six months of receipt, the application is considered denied unless the Director provides written notice that the review will continue. The Director may revoke or modify previously approved investments if they become

DCU Interpretive Letter I-26-01
March 26, 2026 unsafe, inconsistent with law, or imprudent. The Director will provide written notice of any revocation or modification. Requirements Charitable Donation Accounts must conform with RCW 31.12.402(20), which defines qualified organizations as: “Work with community leaders to improve areas where members reside by supporting charitable, social, welfare, or educational purposes, or hold tax-exempt status under
section 501(c)(3) of the Internal Revenue Code.”
Credit unions may use investments listed in RCW 31.12.436(1) for CDAs. For investments outside this list, credit unions must apply under RCW 31.12.436(1) for Director approval. Additionally, NCUA insurance rules require state-chartered credit unions to maintain a reserve equal to the difference between market value and book value for investments not listed in 12 CFR 741.3(a)(2). Minimum Conditions to be Approved CDAs must meet at least the following conditions:

1. The CDA must primarily generate funds for qualified organizations.
2. Aggregate investment cannot exceed five percent of the credit union’s net worth during the
   CDA term.
3. At least 51% of total returns must go to qualified organizations.
4. Distributions must occur at least every five years or upon account termination.
5. CDA assets must be held in segregated custodial accounts or special-purpose entities.
6. If structured as a trust, the trustee must be regulated by OCC, SEC, another federal agency,
   or a state financial regulator.
7. The credit union must document terms and conditions in a written agreement.
8. Upon termination, the credit union may receive remaining assets in cash or permissible
   investments under RCW 31.12.436(1).
   Policy
   The conditions above must be contained in credit union policy governing the creation, funding, and management of CDAs, which must be reviewed annually. At a minimum, the policy must document the investment strategy, risk tolerance, and distribution frequency that the CDA manager (or trustee) must follow in administering the accounts.

DCU Interpretive Letter I-26-01
March 26, 2026
Conclusion
Washington State-chartered credit unions may fund CDAs under RCW 31.12.402(20) using investments listed in RCW 31.12.436(1). For investments outside this list, credit unions must apply to the Director under RCW 31.12.436(1). This interpretive letter applies to all state-chartered credit unions and does not constitute legal advice. If you have any questions, please contact the Division of Credit Unions, at dcu@dfi.wa.gov.