Why This May Be the Perfect Time to Set Up a Charitable Foundation

Even if your credit union is well established as community benefactor, in times of intense turmoil you may feel called upon to stand up and make a new, visible act of leadership and service. This may be a perfect time to create a charitable foundation and to use it as a platform to engage and support your community on behalf of your employees and members.

More Than a Charity

A foundation gives you more than a mechanism for distributing donations. The advantages include:

• It creates a public forum that can shine a light on specific community needs, and the leverage to gather donations from employees, members and other charitable organizations.
• Contributions to a properly set up foundation are tax-deductible. This can be crucial for certain community development or relief causes that don’t otherwise have a channel for tax-deductible contributions. For example, local small businesses affected by the pandemic or another catastrophe probably can’t get tax-deductible contributions directly—but your foundation could accept tax-deductible contributions and distribute them to these businesses. 
• It creates a formal structure for managing your credit union’s philanthropic efforts.

Three Stages to Setting Up a Foundation

1. Pre-formation planning. 

Consider whether a foundation is the best option for your credit union. Other options include simply donating directly from your credit union’s operating expenses, and/or contributing via established local, regional and national credit union industry foundations.

If you decide to move forward with your own foundation:

• Retain an attorney with experience in this arena. 
• Determine who will do what to set up the foundation. 
• Appoint a board of directors.
• Decide how the foundation will be staffed once it is up and running (see stage 3 below). 
• Calculate the necessary start-up capital, and determine how much the foundation would need in annual donations and/or investment returns to be sustainable.
• Consider a charitable donation account as part of your foundation’s funding. The National Credit Union Administration allows certain investments within a CDA that have the potential to earn higher returns for your foundation, with additional risks, compared with such typical credit union investments as certificates of deposit.

2. Incorporation and filing

• Establish the foundation as a separate legal entity from your credit union, in accordance with your state regulations.
• The foundation board should learn your state’s rules governing foundations.
• File for IRS tax-exempt status under Internal Revenue Code 501(c)(3), which typically requires filing IRS Form 1023, “Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code.”

3. Ongoing operation and oversight

In stage one, you should have put together an initial staff to run and oversee your foundation. But often you’ll need to adjust this as the foundation matures. The foundation board may consider drawing staff from:

• Credit union employees whose foundation duties are part of their paid work
• Volunteers from among your employees and from the community—especially including organizations that your foundation will likely be supporting and/or partnering with
• A representative from the local government
• Outside consultants, such as experts in fundraising, public relations, compliance and community development
• A certified public accountant who offers trust services

A credit union foundation can give your board and employees a conduit to provide concrete assistance—a counterpoint to the seemingly unending cycle of terrible news. But foundations shouldn’t be set up in emotional haste. Take your time, work with experts and build your foundation to last.

John Pesh is a director of executive benefits for CUESolutions Platinum provider CUNA Mutual Group, Madison, Wisconsin. 

Proprietary insurance is underwritten by CMFG Life Insurance Company. Proprietary and brokered insurance is sold by CUNA Mutual Insurance Agency, Inc., a wholly-owned subsidiary. This insurance is not a deposit and is not federally insured or guaranteed by your credit union. For more information, contact your Executive Benefits Specialist at 800.356.2644. Representatives are registered through, and securities are sold through, CUNA Brokerage Services, Inc. (CBSI), member, FINRA/SIPC, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 866.512.6109. Insurance and annuity products are sold through CMFG Life Insurance Company. Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the credit union.