[Congressional Record Volume 141, Number 188 (Tuesday, November 28, 1995)]
[House]
[Pages H13677-H13679]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          CHARITABLE GIFT ANNUITY ANTITRUST RELIEF ACT OF 1995

  The Clerk called the bill (H.R. 2525) to modify the operation of the 
antitrust laws, and of State laws similar to the antitrust laws, with 
respect to charitable gift annuities.
  The Clerk read the bill, as follows:

                               H.R. 2525

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Charitable Gift Annuity 
     Antitrust Relief Act of 1995''.

     SEC. 2. MODIFICATION OF ANTITRUST LAWS.

       (a) Exempt Conduct.--Except as provided in subsection (b), 
     it shall not be unlawful under any of the antitrust laws, or 
     under a State law similar to any of the antitrust laws, for 2 
     or more persons described in section 501(c)(3) of the 
     Internal Revenue Code of 1986 (26 U.S.C. 501(c)(3)) that are 
     exempt from taxation under section 501(a) of such Code to 
     use, or to agree to use, the same annuity rate for the 
     purpose of issuing 1 or more charitable gift annuities.
       (b) Limitation.--Subsection (a) shall not apply with 
     respect to the enforcement of a State law similar to any of 
     the antitrust laws, with respect to conduct described in 
     subsection (a) occurring after the State enacts a statute, 
     not later than 3 years after the date of the enactment of 
     this Act, that expressly provides that subsection (a) shall 
     not apply with respect to such conduct.

     SEC. 3. DEFINITIONS.

       For purposes of this Act:
       (1) Annuity rate.--The term ``annuity rate'' means the 
     percentage of the fair market value of a gift (determined as 
     of the date of the gift) given in exchange for a charitable 
     gift annuity, that represents the amount of the annual 
     payment to be made to 1 or 2 annuitants over the life of 
     either or both under the terms of the agreement to give such 
     gift in exchange for such annuity.
       (2) Antitrust laws.--The term ``antitrust laws'' has the 
     meaning given it in subsection (a) of the first section of 
     the Clayton Act (15 U.S.C. 12), except that such term 
     includes section 5 of the Federal Trade Commission Act (15 
     U.S.C. 45) to the extent that such section 5 applies to 
     unfair methods of competition.
       (3) Charitable gift annuity.--The term ``charitable gift 
     annuity'' has the meaning given it in section 501(m)(5) of 
     the Internal Revenue Code of 1986 (26 U.S.C. 501(m)(5)).
       (4) Person.--The term ``person'' has the meaning given it 
     in subsection (a) of the first section of the Clayton Act (15 
     U.S.C. 12(a)).
       (5) State.--The term ``State'' has the meaning given it in 
     section 4G(2) of the Clayton Act (15 U.S.C. 15g(2)).

     SEC. 4. APPLICATION OF ACT.

       This Act shall apply with respect to conduct occurring 
     before, on, or after the date of the enactment of this Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Illinois [Mr. Hyde] and the gentleman from Michigan [Mr. Conyers] each 
will be recognized for 30 minutes.
  The Chair recognizes the gentleman from Illinois [Mr. Hyde].


                             general leave

  Mr. HYDE. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
on H.R. 2525.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Illinois?
  There was no objection.
  Mr. HYDE. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 2525, the Charitable Gift 
Annuity Antitrust Relief Act, which provides antitrust protection for 
nonprofit organizations that issue charitable gift annuities. H.R. 2525 
has been crafted in an extremely narrow manner, so as to protect only 
very limited conduct and to avoid application to any potential 
anticompetitive conduct. I am pleased to be joined by the ranking 
member of the Judiciary Committee, Mr. Conyers, in sponsoring this 
bipartisan measure.
  Charitable gift annuities are one of the oldest and most commonly 
used planned giving vehicles in existence today. Many charities, 
including relatively small ones, issue dozens of gift annuity contracts 
each year, and they do so within rules established by the Internal 
Revenue Code. You have all probably seen the advertisements for 
charities that promise to ``pay you an income for life.'' This is what 
a gift annuity does, and it is the kind of giving that H.R. 2525 is 
designed to protect.

  When a person enters into a gift annuity agreement, he or she is 
actually doing two things--making a charitable gift and purchasing a 
fixed income for life. Probably, if the donor could afford to do so, he 
or she would turn over to the organization as an outright gift the 
entire amount paid for the annuity; but the donor needs to make some 
provision for income while alive. The important thing to remember is 
that gift annuities are not arms-length commercial insurance 
transactions. Donors expect charities to benefit from their gift, and 
they know the charities will 

[[Page H 13678]]
pay less income than banks or insurance companies.
  The annuity rate applied to the value of the gift is the critical 
element in ensuring that the transaction will result in a meaningful 
gift to the charity. The American Council on Gift Annuities, a 
nonprofit organization representing more than 1,500 charitable 
organizations and institutions, assists its members in determining 
annuity rates which will produce an average gift to the organization of 
between 40 and 60 percent of the amount originally donated under the 
agreement.
  H.R. 2525 addresses the application of the antitrust laws, and of 
similar State laws, to the issuance of charitable gift annuities and 
the publication and distribution of suggested annuity rates for 
charitable gift annuities--the activities of the American Council and 
other charitable organizations. In defining the application of the law 
as it pertains to charitable gift annuities, the bill addresses issues 
raised in a class action lawsuit brought in the U.S. District Court for 
the Northern District of Texas, Wichita Falls Division. This lawsuit 
charges that use of the annuity rates recommended by the council 
constitutes price fixing, and thus violates the antitrust laws.
  Mr. Speaker, I believe in the vigorous and nondiscriminatory 
application of the antitrust laws, and as a general matter, I do not 
favor exemptions or exclusions from the antitrust laws. In this limited 
instance, however, it would serve no public policy purpose to subject 
the calculation of charitable gifts to antitrust scrutiny.
  First of all, it is not at all certain that the use of consistent 
annuity rates would be found to be a violation of the antitrust laws. 
The answer depends on whether the issuance of gift annuities is deemed 
``pure charity'' or a ``commercial transaction with a `public service 
aspect.' '' If it is considered ``pure charity,'' the conduct is not 
trade or commerce, and therefore not within the scope of the antitrust 
laws.
  Even if the issuance of charitable annuities were considered trade or 
commerce, a court might well find that use of the same annuity rates is 
not anticompetitive in effect. It is particularly difficult to see what 
anticompetitive effect the supposed setting of prices has in a context 
where the decision to give is motivated not by price but by interest in 
and commitment to a charitable mission. Furthermore, it is unclear 
whether the selection of an annuity rate could be characterized as the 
setting of a price: in this instance an annuity rate merely determines 
the portion of the donation to be returned to the donor, and the 
portion the charity will retain. Donors are not primarily buying an 
annuity; they are making a gift.
  Notwithstanding the serious doubts as to whether the alleged conduct 
would be considered a violation of the antitrust laws, the current 
litigation is causing charities to expend massive amounts of time and 
resources on defending their positions. It is also forcing these 
organizations to make public information about their donors, a fact 
which makes people who guard their privacy reluctant to give. In 
addition, the class action certification makes donors--people who want 
to help their charities--into unwilling adversaries, causing the 
charities to expend donated funds opposing those who gave the funds in 
the first place.

  If the plaintiffs in the class action lawsuit prevail, thousands of 
charities nationwide would be required to refund donations and to pay 
treble damages. This would mean that virtually every charitable 
organization in America is threatened with losses which could total 
billions of dollars.
  Our goal should be to encourage gift giving through legitimate means, 
and particularly through instruments which the IRS approves and 
regulates. Gift annuities carry this imprimatur. Regardless of the 
outcome of the suit, there is no denying that it has had and will 
continue to have a chilling effect on gift giving and that it is 
consuming financial resources which would otherwise be allocated to 
charitable millions. This loss to society far outweighs any possible 
benefit from the application of the antitrust laws to the setting and 
use of charitable annuity rates.
  To eliminate the uncertainty raised by this litigation, and to ensure 
the proper public policy result, H.R. 2525 makes clear that charities' 
use of the same annuity rates when they issue gift annuities does not 
violate Federal or State antitrust laws. The antitrust protection 
provided by H.R. 2525 is intended to extend to attorneys, accountants, 
actuaries, consultants and others retained or employed by a person 
described in section 501(c)(3) of the Internal Revenue Code of 1986, 
when assisting in the issuance of charitable gift annuities or the 
setting of charitable annuity rates.
  I urge my colleagues to join me in protecting the charities of this 
country by voting in favor of H.R. 2525. I also urge my colleagues to 
support complementary legislation introduced by the gentleman from 
Texas [Mr. Fields] which addresses allegations of securities and 
insurance law violations contained in the class action suit. Enactment 
of that bill, H.R. 2519, along with H.R. 2525, will ensure that the 
vital work of charitable organizations can continue without the threat 
of crippling lawsuits.
  Mr. Speaker, I reserve the balance of my time.
  Mr. CONYERS. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. CONYERS asked and was given permission to revise and extend his 
remarks.)
  Mr. CONYERS. Mr. Speaker, I am pleased this day to join with the 
gentleman from Illinois [Mr. Hyde], the distinguished chairman of the 
Committee on the Judiciary, in cosponsoring legislation that will help 
our nonprofits solicit charitable gifts which are so vital to their 
long-term operation and exclude them from being subjected to the 
possibility of unnecessary antitrust litigation.
  As the Members of this body know so well, I support antitrust laws 
and their vigorous exercise thereof, and I am pleased to note that the 
ever-watchful Assistant Attorney General Anne Bingaman of the Antitrust 
Division has not had anything to do with the bringing of this case. 
This case was not brought nor was the Department of Justice involved in 
it in any way.
  I favor the enforcement of antitrust laws and normally am very 
careful about exclusions or exemptions to the antitrust law. This 
limited instance, however, I believe, is one so important and so vital 
to public policy purpose that to subject the calculation of charitable 
gifts to antitrust scrutiny is something that we might want to avoid. 
Moreover, the bill has been crafted in an extremely narrow manner, and 
so it will not apply to any potential anticompetitive conduct.
  The measure before us will overturn a legal action brought in a 
Federal court challenging the actions of the American Council on Gift 
Annuities in recommending annuity rates for nonprofits. These annuity 
rates represent complex calculations which allow donors to receive a 
reasonable future income and a tax deduction while preserving much of 
the gift's value for the charity. If the courts find the antitrust laws 
apply to these actions, it would cost our charities billions of dollars 
in resources and this would come at the expense of urgently needed 
civic and charitable needs at a time when they are more vital then ever 
to those who need them.
  I would like to point out that the case that has been referenced has 
not been concluded. No decision has been rendered. And so we are acting 
in a very zealous fashion to make sure that no outcome that would cast 
a doubt over many of the activities of nonprofits could ever occur.
  I must make one observation, though, that we are here under the 
corrections day calendar, Mr. Speaker. There have been 5 correction 
days and 7 bills so far, but might I point out that this measure could 
have perhaps more properly been brought under suspension of the rules. 
We have bipartisan support, there is little opposition, but to suggest 
that the Sherman Act and the Clayton Act, the antitrust laws of the 
Federal Government, should be subject to a corrections day revision I 
do not think speaks very thoughtfully about the importance of our bill, 
and the fact that the amendment we are making is neither ludicrous nor 
arbitrary. It is a serious change that we are making. We are making it 
in anticipation of a decision that nobody knows what would have 
happened. I think we are quite properly removing a cloud 

[[Page H 13679]]
from over charitable gifts in the first place.
  With that very minor and I hope not too nagging technicality, I also, 
as an original cosponsor of the legislation, urge Members to support 
the passage of this measure.
  Mr. Speaker, I yield 3 minutes to the gentleman from California [Mr. 
Stark].

                              {time}  1515

  Mr. STARK. Mr. Speaker, I thank the gentleman for his kindness.
  I want to support H.R. 2525, granting antitrust relief to charitable 
gift annuities, because we are going to need some more charitable 
gifts.
  Now, to my modern-day pharisees on the other side of the aisle, I 
would point out it is, indeed, a Christian thing to do to encourage 
giving. The Bible uses the word ``give'' 862 times, and the phrase 
``stop giving'' does not appear at all. But the Republicans are 
stopping giving.
  H.R. 2525 may help that. But I wonder, and I am not a lawyer so I 
would have to rely on the Committee on the Judiciary, low-income energy 
assistance is being cut. Should we, therefore, give an exemption to the 
oil companies?
  Food stamps are being capped and cut 20 percent.


                             point of order

  Mr. HYDE. Mr. Speaker, point of order. Should the gentleman's remarks 
be confined to the bill and not to extraneous matter that may be 
lurking within his fertile imagination?
  The SPEAKER pro tempore (Mr. Barr). The gentleman is correct. The 
Chair would admonish the gentleman from California to limit his remarks 
to the subject matter of H.R. 2525 currently pending before this body.
  Mr. STARK. I thank the Speaker, and I shall continue to talk about 
granting of antitrust relief to encourage gift annuities, which I 
believe is the bill, the nexus of the relationship.
  For instance, Medicare, which is being cut where it pays for debt for 
low-income seniors, the hospitals very much want an antitrust 
exemption, which is really the nexus of this bill.
  Would it not be wise to correct the Republican mistake of cutting 
Medicare and to give hospitals an antitrust exemption?
  Or, in the same vein, H.R. 2525 allows antitrust relief. Would if not 
be good to give antitrust relief to the landlords of Macy's and Wal-
Mart because of the $33 billion in earned income tax credits being cut 
out of low-income people while rich people will not need it? I suggest 
that is within the nexus of H.R. 2525 and antitrust relief.
  Finally, college aid is being cut $5 billion. Last weekend Muskingum 
College in Ohio was dropping tuition from $13,000 a year to $9,000 a 
year. I remember when MIT and the Ivy leagues were clamped for 
antitrust for getting together on student aid.
  Why not give the college antitrust relief? Then we will not need the 
college loan program that the Republican are gutting.
  So I say support H.R. 2525. Start a movement. Replace the $254 
billion in charitable cuts the Republicans are making with a Thousand 
Points of Light.
  I urge support of the bill.
  Mr. THORNBERRY. Mr. Speaker, I rise today to add my support to the 
effort being made to assist our Nation's charities, universities, 
hospitals, and other organizations that hold as their sole objective 
assisting the needy. The Philanthropy Protection Act and the Charitable 
Gift Annuity Antitrust Relief Act are necessary steps toward restoring 
the interpretation of the purpose of charitable gifts. Without these 
two pieces of legislation, the foundation for donating charitable gifts 
and trusts will be eliminated.
  Because of a lawsuit filed in my district, organizations ranging from 
the Girl Scouts of America and the Southern Baptist Foundation to the 
Red Cross and Texas Tech University will be in true danger of losing 
their primary source of revenue. In an era when we are asking Americans 
to take greater responsibility for themselves, their families, and 
their neighbors, we must protect charitable organizations' ability to 
continue their work.
  The two acts offered on the House floor today will establish 
charitable gift annuities as an exemption from Federal antitrust and 
securities laws that require interest return at market rates. This will 
enable charitable organizations to continue to accept planned giving 
donations from individuals, pay out reasonable annual returns to the 
donor and provide the excess interest to benevolent activities.
  People who give charitable gifts do not do it to get rich--they do it 
mainly to help others. Using charitable gift annuities and charitable 
trusts makes it possible for donors to make a contribution, while still 
retaining some income from their gift. This flexible arrangement allows 
the funds to be used to care for and educate the less fortunate while 
at the same time providing investment income for the donor.
  In light of the immense benefit of these kind of gifts, it is only 
unfortunate that these bills were precipitated by some heirs seeking to 
retain the donations for their own use. Although this originated in the 
13th District in Texas, the effects of these two acts will benefit the 
entire Nation. It is for these reasons that I am proud to join in this 
bipartisan effort.
  Mr. CONYERS. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  Mr. HYDE. Mr. Speaker, I just want to say how pleasant it is to have 
the gentleman from Michigan [Mr. Conyers] on our side.
  Mr. Speaker, I have no further requests for time, and I yield back 
the balance of my time.
  The SPEAKER pro tempore. Pursuant to the rule, the previous question 
is ordered.
  The question is on the engrossment and third reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.
  The SPEAKER pro tempore. The question is on the passage of the bill.
  The question was taken.
  Mr. HYDE. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 5 of rule I, further 
proceedings on this question are postponed.

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