[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2519 Received in Senate (RDS)]

  1st Session
                                H. R. 2519


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 29, 1995

                                Received

_______________________________________________________________________

                                 AN ACT


 
 To facilitate contributions to charitable organizations by codifying 
  certain exemptions from the Federal securities laws, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Philanthropy 
Protection Act of 1995''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Amendments to the Investment Company Act of 1940.
Sec. 3. Amendment to the Securities Act of 1933.
Sec. 4. Amendments to the Securities Exchange Act of 1934.
Sec. 5. Amendment of the Investment Advisers Act of 1940.
Sec. 6. Protection of philanthropy under State law.
Sec. 7. Effective dates and applicability.

SEC. 2. AMENDMENTS TO THE INVESTMENT COMPANY ACT OF 1940.

    (a) Exemption.--Section 3(c)(10) of the Investment Company Act of 
1940 (15 U.S.C. 80a-3(c)(10) is amended to read as follows:
            ``(10)(A) Any company organized and operated exclusively 
        for religious, educational, benevolent, fraternal, charitable, 
        or reformatory purposes--
                    ``(i) no part of the net earnings of which inures 
                to the benefit of any private shareholder or 
                individual; or
                    ``(ii) which is or maintains a fund described in 
                subparagraph (B).
            ``(B) For the purposes of subparagraph (A)(ii), a fund is 
        described in this subparagraph if such fund is a pooled income 
        fund, collective trust fund, collective investment fund, or 
        similar fund maintained by a charitable organization 
        exclusively for the collective investment and reinvestment of 
        one or more of the following:
                    ``(i) assets of the general endowment fund or other 
                funds of one or more charitable organizations;
                    ``(ii) assets of a pooled income fund;
                    ``(iii) assets contributed to a charitable 
                organization in exchange for the issuance of charitable 
                gift annuities;
                    ``(iv) assets of a charitable remainder trust or of 
                any other trust, the remainder interests of which are 
                irrevocably dedicated to any charitable organization;
                    ``(v) assets of a charitable lead trust;
                    ``(vi) assets of a trust, the remainder interests 
                of which are revocably dedicated to or for the benefit 
                of 1 or more charitable organizations, if the ability 
                to revoke the dedication is limited to circumstances 
                involving--
                            ``(I) an adverse change in the financial 
                        circumstances of a settlor or an income 
                        beneficiary of the trust;
                            ``(II) a change in the identity of the 
                        charitable organization or organizations having 
                        the remainder interest, provided that the new 
                        beneficiary is also a charitable organization; 
                        or
                            ``(III) both the changes described in 
                        subclauses (I) and (II);
                    ``(vii) assets of a trust not described in clauses 
                (i) through (v), the remainder interests of which are 
                revocably dedicated to a charitable organization, 
                subject to subparagraph (C); or
                    ``(viii) such assets as the Commission may 
                prescribe by rule, regulation, or order in accordance 
                with section 6(c).
            ``(C) A fund that contains assets described in clause (vii) 
        of subparagraph (B) shall be excluded from the definition of an 
        investment company for a period of 3 years after the date of 
        enactment of this subparagraph, but only if--
                    ``(i) such assets were contributed before the date 
                which is 60 days after the date of enactment of this 
                subparagraph; and
                    ``(ii) such assets are commingled in the fund with 
                assets described in one or more of clauses (i) through 
                (vi) and (viii) of subparagraph (B).
            ``(D) For purposes of this paragraph--
                    ``(i) a trust or fund is `maintained' by a 
                charitable organization if the organization serves as a 
                trustee or administrator of the trust or fund or has 
                the power to remove the trustees or administrators of 
                the trust or fund and to designate new trustees or 
                administrators;
                    ``(ii) the term `pooled income fund' has the same 
                meaning as in section 642(c)(5) of the Internal Revenue 
                Code of 1986;
                    ``(iii) the term `charitable organization' means an 
                organization described in paragraphs (1) through (5) of 
                section 170(c) or section 501(c)(3) of the Internal 
                Revenue Code of 1986;
                    ``(iv) the term `charitable lead trust' means a 
                trust described in section 170(f)(2)(B), 2055(e)(2)(B), 
                or 2522(c)(2)(B) of the Internal Revenue Code of 1986;
                    ``(v) the term `charitable remainder trust' means a 
                charitable remainder annuity trust or a charitable 
                remainder unitrust, as those terms are defined in 
                section 664(d) of the Internal Revenue Code of 1986; 
                and
                    ``(vi) the term `charitable gift annuity' means an 
                annuity issued by a charitable organization that is 
                described in section 501(m)(5) of the Internal Revenue 
                Code of 1986.''.
    (b) Disclosure by Exempt Charitable Organizations.--Section 7 of 
the Investment Company Act of 1940 (15 U.S.C. 80a-7) is amended by 
adding at the end the following new subsection:
    ``(e) Disclosure by Exempt Charitable Organizations.--Each fund 
that is excluded from the definition of an investment company under 
section 3(c)(10)(B) of this Act shall provide, to each donor to such 
fund, at the time of the donation or within 90 days after the date of 
enactment of this subsection, whichever is later, written information 
describing the material terms of the operation of such fund.''.

SEC. 3. AMENDMENT TO THE SECURITIES ACT OF 1933.

    Section 3(a)(4) of the Securities Act of 1933 (15 U.S.C. 77c(a)(4)) 
is amended by inserting after the semicolon at the end the following: 
``or any security of a fund that is excluded from the definition of an 
investment company under section 3(c)(10)(B) of the Investment Company 
Act of 1940;''.

SEC. 4. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.

    (a) Exempted Securities.--Section 3(a)(12)(A) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)) is amended--
            (1) in clause (iv) by striking ``and'' at the end;
            (2) by redesignating clause (v) as clause (vi); and
            (3) by inserting after clause (iv) the following new 
        clause:
                    ``(v) any security issued by or any interest or 
                participation in any pooled income fund, collective 
                trust fund, collective investment fund, or similar fund 
                that is excluded from the definition of an investment 
                company under section 3(c)(10)(B) of the Investment 
                Company Act of 1940; and''.
    (b) Exemption From Broker-Dealer Provisions.--Section 3 of such Act 
(15 U.S.C. 78c) is amended by adding at the end the following new 
subsection:
    ``(e) Charitable Organizations.--
            ``(1) Exemption.--Notwithstanding any other provision of 
        this title, but subject to paragraph (2) of this subsection, a 
        charitable organization, as defined in section 3(c)(10)(D) of 
        the Investment Company Act of 1940, or any trustee, director, 
        officer, employee, or volunteer of such a charitable 
        organization acting within the scope of such person's 
        employment or duties with such organization, shall not be 
        deemed to be a `broker', `dealer', `municipal securities 
        broker', `municipal securities dealer', `government securities 
        broker', or `government securities dealer' for purposes of this 
        title solely because such organization or person buys, holds, 
        sells, or trades in securities for its own account in its 
        capacity as trustee or administrator of, or otherwise on behalf 
        of or for the account of--
                    ``(A) such a charitable organization;
                    ``(B) a fund that is excluded from the definition 
                of an investment company under section 3(c)(10)(B) of 
                the Investment Company Act of 1940; or
                    ``(C) a trust or other donative instrument 
                described in section 3(c)(10)(B) of the Investment 
                Company Act of 1940, or the settlors (or potential 
                settlors) or beneficiaries of any such trust or other 
                instrument.
            ``(2) Limitation on compensation.--The exemption provided 
        under paragraph (1) shall not be available to any charitable 
        organization, or any trustee, director, officer, employee, or 
        volunteer of such a charitable organization, unless each person 
        who, on or after 90 days after the date of enactment of this 
        subsection, solicits donations on behalf of such charitable 
        organization from any donor to a fund that is excluded from the 
        definition of an investment company under section 3(c)(10)(B) 
        of the Investment Company Act of 1940, is either a volunteer or 
        is engaged in the overall fund raising activities of a 
        charitable organization and receives no commission or other 
        special compensation based on the number or the value of 
        donations collected for the fund.''.
    (d) Conforming Amendment.--Section 12(g)(2)(D) of such Act (15 
U.S.C. 78l(g)(2)(D)) is amended by inserting before the period ``; or 
any security of a fund that is excluded from the definition of an 
investment company under section 3(c)(10)(B) of the Investment Company 
Act of 1940''.

SEC. 5. AMENDMENT OF THE INVESTMENT ADVISERS ACT OF 1940.

    Section 203(b) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-3(b)) is amended--
            (1) by striking ``or'' at the end of paragraph (2);
            (2) by striking the period at the end of paragraph (3) and 
        inserting ``; or''; and
            (3) by adding at the end the following new paragraph:
            ``(4) any investment adviser that is a charitable 
        organization, as defined in section 3(c)(10)(D) of the 
        Investment Company Act of 1940, or is a trustee, director, 
        officer, employee, or volunteer of such a charitable 
        organization acting within the scope of such person's 
        employment or duties with such organization, whose advice, 
        analyses, or reports are provided only to one or more of the 
        following:
                    ``(A) any such charitable organization;
                    ``(B) a fund that is excluded from the definition 
                of an investment company under section 3(c)(10)(B) of 
                the Investment Company Act of 1940; or
                    ``(C) a trust or other donative instrument 
                described in section 3(c)(10)(B) of the Investment 
                Company Act of 1940, or the trustees, administrators, 
                settlors (or potential settlors), or beneficiaries of 
                any such trust or other instrument.''.

SEC. 6. PROTECTION OF PHILANTHROPY UNDER STATE LAW.

    (a) Registration Requirements.--A security issued by or any 
interest or participation in any pooled income fund, collective trust 
fund, collective investment fund, or similar fund that is excluded from 
the definition of an investment company under section 3(c)(10)(B) of 
the Investment Company Act of 1940, and the offer or sale thereof, 
shall be exempt from any statute or regulation of a State that requires 
registration or qualification of securities.
    (b) Treatment of Charitable Organizations.--No charitable 
organization, or any trustee, director, officer, employee, or volunteer 
of a charitable organization acting within the scope of such person's 
employment or duties, shall be required to register as, or be subject 
to regulation as, a dealer, broker, agent, or investment adviser under 
the securities laws of any State because such organization or person 
buys, holds, sells, or trades in securities for its own account in its 
capacity as trustee or administrator of, or otherwise on behalf of or 
for the account of one or more of the following:
            (1) a charitable organization;
            (2) a fund that is excluded from the definition of an 
        investment company under section 3(c)(10)(B) of the Investment 
        Company Act of 1940; or
            (3) a trust or other donative instrument described in 
        section 3(c)(10)(B) of the Investment Company Act of 1940, or 
        the settlors (or potential settlors) or beneficiaries of any 
        such trusts or other instruments.
    (c) State Action.--Notwithstanding subsections (a) and (b), during 
the 3-year period beginning on the date of enactment of this Act, a 
State may enact a statute that specifically refers to this section and 
provides prospectively that this section shall not preempt the laws of 
that State referred to in this section.
    (d) Definitions.--For purposes of this section--
            (1) the term ``charitable organization'' means an 
        organization described in paragraphs (1) through (5) of section 
        170(c) or section 501(c)(3) of the Internal Revenue Code of 
        1986;
            (2) the term ``security'' has the same meaning as in 
        section 3 of the Securities Exchange Act of 1934; and
            (3) the term ``State'' means each of the several States of 
        the United States, the District of Columbia, the Commonwealth 
        of Puerto Rico, the Virgin Islands, Guam, American Samoa, and 
        the Commonwealth of the Northern Mariana Islands.

SEC. 7. EFFECTIVE DATES AND APPLICABILITY.

    This Act and the amendments made by this Act shall apply in all 
administrative and judicial actions pending on or commenced after the 
date of enactment of this Act, as a defense to any claim that any 
person, security, interest, or participation of the type described in 
this Act and the amendments made by this Act is subject to the 
provisions of the Securities Act of 1933, the Securities Exchange Act 
of 1934, the Investment Company Act of 1940, or the Investment Advisers 
Act of 1940, or any State statute or regulation preempted as provided 
in section 6 of this Act, except as otherwise specifically provided in 
such Acts or State law.

            Passed the House of Representatives November 28, 1995.

            Attest:

                                                ROBIN H. CARLE,

                                                                 Clerk.