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Publication 557

501(c)(14) - Credit Unions and Other Mutual Financial Organizations(p55)

If your organization wants to obtain recognition of exemption as a credit union without capital stock, organized and operated under state law for mutual purposes and without profit, it must file an application that includes the facts, information, and attachments described in this section. In addition, it should follow the procedures for filing an application described in Application Procedures in chapter 1.
Federal credit unions organized and operated in accordance with the Federal Credit Union Act, as amended, are instrumentalities of the United States and, therefore, are exempt under section 501(c)(1). They are included in a group exemption letter issued to the National Credit Union Administration. They are not discussed in this publication.
State-chartered credit unions and other mutual financial organizations file applications for recognition of exemption from federal income tax under section 501(c)(14). The other mutual financial organizations must be corporations or associations without capital stock organized before September 1, 1957, and operated for mutual purposes and without profit to provide reserve funds for, and insurance of, shares or deposits in:
  1. Domestic building and loan associations,
  2. Cooperative banks (without capital stock) organized and operated for mutual purposes and without profit,
  3. Mutual savings banks (not having capital stock represented by shares), or
  4. Mutual savings banks described in section 591(b).
Similar organizations, formed before September 1, 1957, that provide reserve funds for (but not insurance of shares or deposits in) one of the types of savings institutions described in (1), (2), or (3) above may be exempt from tax if 85% or more of the organization's income is from providing reserve funds and from investments. There is no specific restriction against the issuance of capital stock for these organizations.
Building and loan associations, savings and loan associations, mutual savings banks, and cooperative banks, other than those described in this section, are not exempt from tax. However, certain corporations organized and operated in conjunction with farmers' cooperatives can be exempt under section 521.

Application form.(p56)

The IRS does not provide a printed application form for the use of organizations described in this section. Any form of written application is acceptable as long as it shows the information indicated in this section and includes a declaration that it is made under the penalties of perjury. The application must be submitted in duplicate.

State-Chartered Credit Unions(p56)

Your organization must show on its application that it is formed under a state credit union law, the state and date of incorporation, and that the state credit union law with respect to loans, investments, and dividends, if any, is being complied with.
A form of statement furnished to applicants by the Credit Union National Association is acceptable in meeting the application requirements for credit unions, and may be used instead of the statement form of application just described. The following is a reproduction of that form.

Claim for Exemption from Federal Income Tax  ____ (Date)(p56)

The undersigned ____  (Complete name) Credit Union, Inc.,  ____ (Complete address, including street and number), a credit union operating under the credit union law of the State of ____ , claims exemption from federal income tax and supplies the following information relative to its operation.
  1. Date of incorporation  ____ .
  2. It was incorporated under the credit union law of the State of  ____ , and is being operated under uniform bylaws adopted by said state.
  3. In making loans, the state credit union law requirements, including their purposes, security, and rate of interest charged thereon, are complied with.
  4. Its investments are limited to securities which are legal investments for credit unions under the state credit union law.
  5. Its dividends on shares, if any, are distributed as prescribed by the state credit union law.
I, the undersigned, a duly authorized officer of the  ____ Credit Union, Inc., declare that the above information is a true statement of facts concerning the credit union.
Signature of Officer ____ Title ____ 

Other Mutual Financial Organizations(p56)

Every other organization included in this section must show in its application the state in which the organization is incorporated and the date of incorporation; the character of the organization; the purpose for which it was organized; its actual activities; the sources of its receipts and the disposition thereof; whether any of its income may be credited to surplus or may benefit any private shareholder or individual; whether the law relating to loans, investments, and dividends is being complied with; and, in general, all facts relating to its operations that affect its right to exemption.
The application must include detailed information showing either that the organization provides both reserve funds for and insurance of shares and deposits of its member financial organizations or that the organization provides reserve funds for shares or deposits of its members and 85% or more of the organization's income is from providing reserve funds and from investments. There should be attached a conformed copy of the articles of incorporation or other document setting forth the permitted powers or activities of the organization; the bylaws or other similar code of regulations; and the latest annual financial statement showing the receipts, disbursements, assets, and liabilities of the organization.