Charitable Donation Accounts Advisory

What are Charitable Donation Accounts?

Charitable Donation Accounts (CDAs) are investment accounts that grant credit unions special investment capabilities while supporting their donations to charities. By utilizing CDAs, your institution has the opportunity to fund charitable contributions through investment returns rather than through operating income.

Align your CDA with ALM First Financial Advisors

ALM First Financial Advisors believes institutions can play a great role in improving the communities in which they operate. By partnering with ALM First Financial Advisors, you can:

In addition, working with ALM First Financial Advisors’ team of experts, you receive an unbiased perspective, a low-fee portfolio operation, and the industry-leading analytics needed for successful management.

Key Components

Adherence to regulatory and compliance guidelines is critical when constructing CDAs. The Internal Revenue Code and U.S. Federal Regulations govern eligible organizations and charitable donations. The following are some of a CDAs’ fundamental aspects and benefits:

  • Maximum Aggregate Funding: Limited to 5% of net worth for duration of all accounts.

  • Return for Donation and Excess Return: At least 51% of total return must be donated to a qualifying organization.

  • Minimum Distribution: Required distribution no less than every 5 years, and the discretion on frequency of distributions is made during each 5 year period.

  • Education & Due Diligence: Credit unions must demonstrate an understanding of the risks involved with their investments and perform proper due diligence.

Ensuring that CDA investment accounts are properly managed and their risks are well-understood is a win-win for credit unions and their communities. ALM First Financial Advisors is here to help

Can we donate to any non-profit organization?

No. Only charitable contributions and donations can be made to tax-exempt organizations defined under section 501(c)(3) of the Internal Revenue Code. This applies only to entities operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for testing for public safety, or to foster national or international amateur sports competition, or for the prevention of cruelty to children, women, or animals.

Who can authorize investment decisions for a CDA?

The credit union will always have authority over investment decisions when participating in a CDA. However, any other entity authorized to make investment decisions on behalf of the institution must be either an SEC Registered Investment Advisor or regulated by the Office of the Comptroller of Currency.

How often should we make contributions?

Each institution has discretion over the frequency of contributions, provided they make at least 1 contribution every 5 years. Regardless, the frequency of contributions must be documented in writing to satisfy U.S. Federal Regulations.

Get Started Now

Contact us today to strengthen your community involvement.

Related Articles

Related Events

All investing is subject to risk, including the possible loss of the money you invest.

“ALM First” is a brand name for a financial services business conducted by ALM First Group, LLC (“ALM First”) through its wholly owned subsidiaries: ALM First Financial Advisors, LLC (“ALM First Financial Advisors”); ALM First Advisors, LLC (“ALM First Advisors”); and ALM First Analytics, LLC (“ALM First Analytics”).  Investment advisory services are offered through ALM First Financial Advisors, an SEC registered investment adviser.  Balance sheet advisory services are offered through ALM First Advisors.  Financial reporting services, loan introduction services, and other special project services are offered through ALM First Analytics.  Neither ALM First nor any of its subsidiaries provide legal, tax, or accounting advice.

INVESTMENT PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, ALM FIRST OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.