Dear Ms. Lambert:
You have asked if NCUA’s use of the term “compensation” in §701.33 of its regulations exempts a federal credit union (FCU) from complying with Internal Revenue Code (IRC) provisions requiring an FCU to issue a Form 1099 to an individual. No, it does not.
Section 701.33 provides that only one board officer of an FCU, if any, may be compensated as an officer of the board. 12 C.F.R. §701.33(b)(1). The regulation further states that, for purposes of
§701.33, the term “compensation” excludes the following:
i) Payment (by reimbursement to an official or direct credit union payment to a third party) for
reasonable and proper costs incurred by an official in carrying out the responsibilities of the
position to which that person has been elected or appointed, if the payment is determined by the board of directors to be necessary or appropriate in order to carry out the official business of the credit union, and is in accordance with written policies and procedures, including documentation requirements, established by the board of directors. Such payments may include the payment of travel costs for officials and one guest per official;
(ii) Provision of reasonable health, accident and related types of personal insurance protection, supplied for officials at the expense of the credit union: Provided, that such insurance protection must exclude life insurance; must be limited to areas of risk, including accidental death and dismemberment, to which the official is exposed by reason of carrying out the duties or responsibilities of the official's credit union position; must cease immediately upon the insured person's leaving office, without providing residual benefits other than from pending claims, if any; except that a credit union must comply with federal and state laws providing departing officials the right to maintain health insurance coverage at their own expense; and
(iii) Indemnification and related insurance consistent with paragraph (c) of this section.
12 C.F.R. §701.33(b)(2)(i), (ii), and (iii).
The use of the term “compensation” in §701.33 is only for the purpose of describing the kind and
amount of payment or reimbursement an FCU is permitted to provide to a board officer. NCUA’s use of that term does not in any way affect an FCU’s obligation to issue a Form 1099 to an individual when the IRC requires it.
This opinion explains the relationship between §701.33 and the IRC. It does not address if any
payment or reimbursement you have provided to your board officers is compensation under §701.33. Also, it does not address if you are required to issue a Form 1099 to any of your board officers for any particular payment.
Please feel free to contact Senior Staff Attorney Frank Kressman or me with any additional
questions or if we can be of further assistance.