[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2519 Enrolled Bill (ENR)]
H.R.2519
One Hundred Fourth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Wednesday,
the fourth day of January, one thousand nine hundred and ninety-five
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,

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(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:

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(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.''.

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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;''.

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(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''.

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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.''.

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(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.

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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.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.

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Philanthropy Protection Act of 1995 — HR. 2519

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