I

104TH CONGRESS

1ST SESSION H. R. 1299

To amend the Internal Revenue Code of 1986 with respect to the treatment

of certain charitable risk pools.

IN THE HOUSE OF REPRESENTATIVES

MARCH 22, 1995

Mr. THOMAS (for himself, Mr. STARK, and Mr. FARR) introduced the

following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 with respect

to the treatment of certain charitable risk pools.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. TREATMENT OF CERTAIN CHARITABLE RISK

4 POOLS.

5 (a) GENERAL RULE.—Section 501 of the Internal

6 Revenue Code of 1986 (relating to exemption from tax on

7 corporations, certain trusts, etc.) is amended by redesig8 nating subsection (n) as subsection (o) and by inserting

9 after subsection (m) the following new subsection:

10 ‘‘(n) CHARITABLE RISK POOLS.—
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1 ‘‘(1) IN GENERAL.—For purposes of this title—

2 ‘‘(A) a qualified charitable risk pool shall

3 be treated as an organization organized and op4 erated exclusively for charitable purposes, and

5 ‘‘(B) subsection (m) shall not apply to a

6 qualified charitable risk pool.

7 ‘‘(2) QUALIFIED CHARITABLE RISK POOL.—For

8 purposes of this subsection, the term ‘qualified char9 itable risk pool’ means any organization—

10 ‘‘(A) which is organized and operated sole11 ly to pool insurable risks of its members (other

12 than risks related to medical malpractice) and

13 to provide information to its members with re14 spect to loss control and risk management,

15 ‘‘(B) no part of the net earnings of which

16 inures to the benefit of any member or other

17 person other than through providing insurance

18 coverage (or information) described in subpara19 graph (A),

20 ‘‘(C) which is comprised solely of members

21 that are organizations described in subsection

22 (c)(3) and exempt from tax under subsection

23 (a), and

24 ‘‘(D) which meets the organizational re25 quirements of paragraph (3).
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1 ‘‘(3) ORGANIZATIONAL REQUIREMENTS.—An

2 organization (hereinafter in this subsection referred

3 to as the ‘risk pool’) meets the organizational re4 quirements of this paragraph if—

5 ‘‘(A) such risk pool is organized as a non6 profit organization under State law provisions

7 authorizing risk pooling arrangements for chari8 table organizations,

9 ‘‘(B) such risk pool is exempt from any in10 come tax imposed by the State (or will be so ex11 empt after such pool qualifies as an organiza12 tion exempt from tax under this title),

13 ‘‘(C) such risk pool has obtained at least

14 $1,000,000 in startup capital from nonmember

15 charitable organizations,

16 ‘‘(D) such risk pool is controlled by a

17 board of directors elected by its members, and

18 ‘‘(E) the organizational documents of such

19 risk pool require that—

20 ‘‘(i) each member of such pool shall at

21 all times be an organization described in

22 subsection (c)(3) and exempt from tax

23 under subsection (a),

24 ‘‘(ii) any member which receives a

25 final determination that it no longer quali-
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1 fies as an organization described in sub2 section (c)(3) shall immediately notify the

3 pool of such determination and the effec4 tive date of such determination, and

5 ‘‘(iii) each policy of insurance issued

6 by the risk pool shall provide that such

7 policy will not cover the insured with re8 spect to events occurring after the date

9 such final determination was issued to the

10 insured.

11 An organization shall not cease to qualify as a quali12 fied charitable risk pool solely by reason of the fail13 ure of any of its members to continue to be an orga14 nization described in subsection (c)(3) if, within a

15 reasonable period of time after such pool is notified

16 as required under subparagraph (C)(ii), such pool

17 takes such action as may be reasonably necessary to

18 remove such member from such pool.

19 ‘‘(4) OTHER DEFINITIONS.—For purposes of

20 this subsection—

21 ‘‘(A) STARTUP CAPITAL.—The term ‘start22 up capital’ means any capital contributed to,

23 and any program-related investments (within

24 the meaning of section 4944(c)) made in, the
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1 risk pool before such pool commences oper2 ations.

3 ‘‘(B) NONMEMBER CHARITABLE ORGANI4 ZATION.—The term ‘nonmember charitable or5 ganization’ means any organization which is de6 scribed in subsection (c)(3) and exempt from

7 tax under subsection (a) and which is not a

8 member of the risk pool and does not benefit

9 (directly or indirectly) from the insurance cov10 erage provided by the pool to its members.’’

11 (b) EFFECTIVE DATE.—The amendment made by

12 subsection (a) shall apply to taxable years beginning after

13 December 31, 1991.

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