To amend the Internal Revenue Code of 1986 with respect to the treatment of certain charitable risk pools.

Summary: Amends the Internal Revenue Code to allow a tax exemption for charitable risk pools organized and operated exclusively for charitable purposes.

SECTION 1. TREATMENT OF CERTAIN CHARITABLE RISK POOLS.

    (a) General Rule.--Section 501 of the Internal Revenue Code of 1986 
(relating to exemption from tax on corporations, certain trusts, etc.) 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Charitable Risk Pools.--
            ``(1) In general.--For purposes of this title--
                    ``(A) a qualified charitable risk pool shall be 
                treated as an organization organized and operated 
                exclusively for charitable purposes, and
                    ``(B) subsection (m) shall not apply to a qualified 
                charitable risk pool.
            ``(2) Qualified charitable risk pool.--For purposes of this 
        subsection, the term `qualified charitable risk pool' means any 
        organization--
                    ``(A) which is organized and operated solely to 
                pool insurable risks of its members (other than risks 
                related to medical malpractice) and to provide 
                information to its members with respect to loss control 
                and risk management,
                    ``(B) no part of the net earnings of which inures 
                to the benefit of any member or other person other than 
                through providing insurance coverage (or information) 
                described in subparagraph (A),
                    ``(C) which is comprised solely of members that are 
                organizations described in subsection (c)(3) and exempt 
                from tax under subsection (a), and
                    ``(D) which meets the organizational requirements 
                of paragraph (3).
            ``(3) Organizational requirements.--An organization 
        (hereinafter in this subsection referred to as the `risk pool') 
        meets the organizational requirements of this paragraph if--
                    ``(A) such risk pool is organized as a nonprofit 
                organization under State law provisions authorizing 
                risk pooling arrangements for charitable organizations,
                    ``(B) such risk pool is exempt from any income tax 
                imposed by the State (or will be so exempt after such 
                pool qualifies as an organization exempt from tax under 
                this title),
                    ``(C) such risk pool has obtained at least 
                $1,000,000 in startup capital from nonmember charitable 
                organizations,
                    ``(D) such risk pool is controlled by a board of 
                directors elected by its members, and
                    ``(E) the organizational documents of such risk 
                pool require that--
                            ``(i) each member of such pool shall at all 
                        times be an organization described in 
                        subsection (c)(3) and exempt from tax under 
                        subsection (a),
                            ``(ii) any member which receives a final 
                        determination that it no longer qualifies as an 
                        organization described in subsection (c)(3) 
                        shall immediately notify the pool of such 
                        determination and the effective date of such 
                        determination, and
                            ``(iii) each policy of insurance issued by 
                        the risk pool shall provide that such policy 
                        will not cover the insured with respect to 
                        events occurring after the date such final 
                        determination was issued to the insured.
        An organization shall not cease to qualify as a qualified 
        charitable risk pool solely by reason of the failure of any of 
        its members to continue to be an organization described in 
        subsection (c)(3) if, within a reasonable period of time after 
        such pool is notified as required under subparagraph (C)(ii), 
        such pool takes such action as may be reasonably necessary to 
        remove such member from such pool.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Startup capital.--The term `startup capital' 
                means any capital contributed to, and any program-
                related investments (within the meaning of section 
                4944(c)) made in, the risk pool before such pool 
                commences operations.
                    ``(B) Nonmember charitable organization.--The term 
                `nonmember charitable organization' means any 
                organization which is described in subsection (c)(3) 
                and exempt from tax under subsection (a) and which is 
                not a member of the risk pool and does not benefit 
                (directly or indirectly) from the insurance coverage 
                provided by the pool to its members.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1991.