Is a credit union considered a "bank: for the purpose of exemption? If a credit union can be exempted, do we check "bank" under number 10 on the Exempt Person Form as the Type of Exempt Person?

Yes, a credit union is considered a bank and you would check "bank" on the DOEP form. See 31 CFR 103.11(c) for the definition.

I want to see if I am understanding the new exemption rules effective January 5, 2009.
If this FI waits until January 5th to determine they want to exempt the credit union, there would be no requirement for an intitial DOEp form 110. THey would just need to have demonstrated through their CIP program that this was a depository institution and therefore able to be exempted. No documentation requirements, no files to maintain. Yes?

That is correct, River Girl. If any otherwise reportable transaction occurred before 12/6/08 (30 days prior to 1/5/09, they need to either file a CTR (too late to timely do that now) or file a DOEP to technically comply. Otherwise, waiting until 1/5 is a good idea.

Correction. You need to document that you verified it's a depository institution. That's a simple one page print from the NCUA site or a state regulator's site.