II

104TH CONGRESS

1ST SESSION S. 978

To facilitate contributions to charitable organizations by codifying certain

exemptions from the Federal securities laws, to clarify the inapplicability

of antitrust laws to charitable gift annuities, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 28 (legislative day, JUNE 19), 1995

Mrs. HUTCHISON (for herself and Mr. DODD) introduced the following bill;

which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To facilitate contributions to charitable organizations by codifying certain exemptions from the Federal securities

laws, to clarify the inapplicability of antitrust laws to

charitable gift annuities, and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Charitable Giving Protection Act of 1995’’.

6 (b) TABLE OF CONTENTS.—The table of contents for

7 this Act is as follows:

Sec. 1. Short title; table of contents.
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Sec. 2. Findings.

TITLE I—AMENDMENTS TO THE SECURITIES LAWS

Sec. 101. Amendment to the Investment Company Act of 1940.

Sec. 102. Amendment to the Securities Act of 1933.

Sec. 103. Amendments to the Securities Exchange Act of 1934.

Sec. 104. Amendment of the Investment Advisers Act of 1940.

Sec. 105. Effective dates and applicability.

TITLE II—CLARIFICATION OF ANTITRUST LAWS

Sec. 201. Exemption from antitrust laws.

Sec. 202. Effective date and applicability.

1 SEC. 2. FINDINGS.

2 The Congress finds that—

3 (1) charities have served a unique and essential

4 role in meeting the needs of the American people;

5 (2) charities have healed the sick, fed the hun6 gry, sheltered the needy, and educated our children;

7 (3) in order to ensure that charities can con8 tinue to meet the needs of the American people, the

9 Federal Government should do everything possible to

10 encourage charitable giving;

11 (4) charities should be able to raise funds and

12 invest funds, both on their own and collectively with

13 other charities, without excessive Government inter14 vention or unnecessary legal or regulatory require15 ments;

16 (5) the Congress, in passing the Technical Cor17 rections Act of 1988, differentiated between chari18 table gift annuities and annuities issued by commer19 cial organizations for profit; and
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1 (6) unlike commercial annuities, charitable gift

2 annuities are not issued for profit, and their issu3 ance, maintenance, and investment by charities is

4 not subject to the anticompetitive prohibitions of the

5 Federal antitrust laws.

6 TITLE I—AMENDMENTS TO THE

7 SECURITIES LAWS

8 SEC. 101. AMENDMENT TO THE INVESTMENT COMPANY ACT

9 OF 1940.

10 Section 3(c) of the Investment Company Act of 1940

11 (15 U.S.C. 80a–3(c)) is amended by inserting after para12 graph (6) the following new paragraph:

13 ‘‘(7)(A) Subject to subparagraph (B), a pooled

14 income fund, or any collective trust fund, collective

15 investment fund, or similar fund maintained by a

16 charitable organization exclusively for the collective

17 investment and reinvestment of—

18 ‘‘(i) the general endowment fund or other

19 funds of one or more charitable organizations;

20 ‘‘(ii) assets of a pooled income fund;

21 ‘‘(iii) assets contributed to a charitable or22 ganization in exchange for the issuance of char23 itable gift annuities;

24 ‘‘(iv) assets of a charitable remainder trust

25 or of any other trust, the remainder interests of
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1 which are irrevocably dedicated to any chari2 table organization;

3 ‘‘(v) assets of a charitable lead trust; or

4 ‘‘(vi) assets of a trust not described in

5 clauses (i) through (v), the remainder interests

6 of which are revocably dedicated to a charitable

7 organization.

8 ‘‘(B) A fund described in subparagraph (A),

9 and any charitable organization that maintains such

10 a fund, shall be excluded from treatment as an in11 vestment company in accordance with this sub12 section only if—

13 ‘‘(i) each contributor to a pooled income

14 fund and each settlor of a trust described in

15 clause (iv), (v), or (vi) of subparagraph (A) is

16 provided with written information describing

17 the material terms of the instruments governing

18 the operation of the pooled income fund, in the

19 case of a contributor to such fund, or of the

20 fund in which any assets of such pooled income

21 fund or such a trust are invested, by the later

22 of June 30, 1996, or the date of investment in

23 such fund; and

24 ‘‘(ii) each person soliciting gifts, as de25 scribed in subparagraph (A), that will be ad-
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1 ministered in any collective trust fund, collective

2 investment fund, or similar fund maintained by

3 a charitable organization is either a volunteer

4 or is employed in the overall fundraising activi5 ties of a charitable organization and receives no

6 commissions or other special compensation

7 based on the amount of gifts transferred to

8 such fund.

9 ‘‘(C) The exemption provided by subparagraph

10 (A)(vi) shall terminate on December 31, 1998.

11 ‘‘(D) For purposes of this paragraph—

12 ‘‘(i) a trust or fund is ‘maintained’ by a

13 charitable organization that serves as a trustee

14 or administrator of the trust or fund or that

15 has the power to remove the trustees or admin16 istrators of the trust or fund and to designate

17 new trustees or administrators;

18 ‘‘(ii) the term ‘pooled income fund’ has the

19 same meaning as in section 642(c)(5) of the In20 ternal Revenue Code of 1986;

21 ‘‘(iii) the term ‘charitable organization’

22 means an organization described in paragraphs

23 (1) through (5) of section 170(c) or section

24 501(c)(3) of the Internal Revenue Code of

25 1986;
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1 ‘‘(iv) the term ‘charitable lead trust’ means

2 a trust described in section 170(f)(2)(B),

3 2055(e)(2)(B), or 2522(c)(2)(B) of the Internal

4 Revenue Code of 1986;

5 ‘‘(v) the term ‘charitable remainder trust’

6 means a charitable remainder annuity trust or

7 a charitable remainder unitrust, as those terms

8 are defined in section 664(d) of the Internal

9 Revenue Code of 1986; and

10 ‘‘(vi) the term ‘charitable gift annuity’

11 means an annuity issued by a charitable organi12 zation that is described in section 501(m)(5) of

13 the Internal Revenue Code of 1986.’’.

14 SEC. 102. AMENDMENT TO THE SECURITIES ACT OF 1933.

15 Section 3(a) of the Securities Act of 1933 (15 U.S.C.

16 77c(a)) is amended by adding at the end the following new

17 paragraph:

18 ‘‘(13) Any security issued by or any interest or

19 participation in any pooled income fund, collective

20 trust fund, collective investment fund, or similar

21 fund that is deemed not to be an investment com22 pany under section 3(c)(7) of the Investment Com23 pany Act of 1940.’’.
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1 SEC. 103. AMENDMENTS TO THE SECURITIES EXCHANGE

2 ACT OF 1934.

3 (a) EXEMPTED SECURITIES.—Section 3(a)(12)(A) of

4 the Securities Exchange Act of 1934 (15 U.S.C.

5 78c(a)(12)(A)) is amended—

6 (1) in clause (iv) by striking ‘‘and’’ at the end;

7 (2) by redesignating clause (v) as clause (vi);

8 and

9 (3) by inserting after clause (iv) the following

10 new clause:

11 ‘‘(v) any security issued by or any in12 terest or participation in any pooled in13 come fund, collective trust fund, collective

14 investment fund, or similar fund that is

15 deemed not to be an investment company

16 under section 3(c)(7) of the Investment

17 Company Act of 1940; and’’.

18 (b) EXEMPTION FROM BROKER-DEALER PROVI19 SIONS.—Section 3(a) of the Securities Exchange Act of

20 1934 (15 U.S.C. 78c(c)) is amended by adding at the end

21 the following new paragraph:

22 ‘‘(54) CHARITABLE ORGANIZATIONS.—Notwith23 standing any other provision of this title, a chari24 table organization, as defined in section 3(c)(7) of

25 the Investment Company Act of 1940, or any trust-
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1 ee, director, officer, employee, or volunteer of such

2 a charitable organization acting within the scope of

3 such person’s employment or duties, shall not be

4 deemed to be a ‘broker’, ‘dealer’, ‘municipal securi5 ties broker’, ‘municipal securities dealer’, ‘govern6 ment securities broker’, or ‘government securities

7 dealer’ for purposes of this title solely because such

8 organization or person buys, holds, sells, or trades in

9 securities for its own account in its capacity as

10 trustee or administrator of, or otherwise on behalf of

11 or for the account of—

12 ‘‘(A) such a charitable organization;

13 ‘‘(B) a fund that is exempt from the provi14 sions of the Investment Company Act of 1940

15 under section 3(c)(7) of that Act; or

16 ‘‘(C) a trust or other donative instrument,

17 the assets of which may be contributed to or in18 vested in such funds in accordance with section

19 3(c)(7) of the Investment Company Act of

20 1940, or the settlors (or potential settlors) or

21 beneficiaries of any such trust or other instru22 ment.’’.
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1 SEC. 104. AMENDMENT OF THE INVESTMENT ADVISERS ACT

2 OF 1940.

3 Section 202(a)(11) of the Investment Advisers Act of

4 1940 (15 U.S.C. 80b–2(a)(11)) is amended—

5 (1) by striking ‘‘does not include (A) a bank’’

6 and inserting ‘‘does not include—

7 ‘‘(A) a bank’’;

8 (2) by striking ‘‘(B) any lawyer’’ and inserting

9 the following:

10 ‘‘(B) any lawyer’’;

11 (3) by striking ‘‘(C) any broker’’ and inserting

12 the following:

13 ‘‘(C) any broker’’;

14 (4) by striking ‘‘(D) the publisher’’ and insert15 ing the following:

16 ‘‘(D) the publisher’’;

17 (5) by striking ‘‘(E) any person’’ and inserting

18 the following:

19 ‘‘(E) any person’’;

20 (6) by striking ‘‘or (F) such other’’ and insert21 ing the following:

22 ‘‘(G) such other’’; and

23 (7) by inserting after subparagraph (E) the fol24 lowing new subparagraph:

25 ‘‘(F) any charitable organization, as de26 fined in section 3(c)(7) of the Investment Com-
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1 pany Act of 1940, or any trustee, director, offi2 cer, employee, or volunteer of such a charitable

3 organization acting within the scope of the em4 ployment or duties of such person, whose ad5 vice, analyses, or reports are provided only to—

6 ‘‘(i) any such charitable organization;

7 ‘‘(ii) a fund that is exempt from the

8 Investment Company Act of 1940 under

9 section 3(c)(7) of that Act, or the trustees

10 or administrators of such fund; or

11 ‘‘(iii) a trust or other donative instru12 ment, the assets of which may be contrib13 uted to or invested in such fund in accord14 ance with section 3(c)(7) of the Investment

15 Company Act of 1940, or the trustees, ad16 ministrators, settlors (or potential set17 tlors), or beneficiaries of any such trust or

18 other instrument; or’’.

19 SEC. 105. EFFECTIVE DATES AND APPLICABILITY.

20 This title and the amendments made by this title

21 shall apply in all administrative and judicial actions pend22 ing on or commenced after the date of enactment of this

23 Act, as a defense to any claim that any person, security,

24 interest, or participation of the type described in this title

25 and the amendments made by this title is subject to the
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1 provisions of the Securities Act of 1933, the Securities Ex2 change Act of 1934, the Investment Company Act of

3 1940, or the Investment Advisers Act of 1940, except as

4 otherwise specifically provided in those Acts.

5 SEC. 106. PREEMPTION OF STATE LAW.

6 (a) REGISTRATION REQUIREMENTS.—A security is7 sued by or any interest or participation in any pooled in8 come fund, collective trust fund, collective investment

9 fund, or similar fund that is exempt from the Investment

10 Company Act of 1940 under section 3(c)(7) of that Act,

11 and the offer or sale thereof, shall be exempt from any

12 law of a State that requires registration or qualification

13 of securities.

14 (b) TREATMENT OF CHARITABLE ORGANIZATIONS.—

15 No charitable organization, or any trustee, director, offi16 cer, employee, or volunteer of a charitable organization

17 acting within the scope of such person’s employment or

18 duties, shall be required to register as, or be subject to

19 regulation as, a dealer, broker, agent, or investment ad20 viser under the laws of any State solely because such orga21 nization or person buys, holds, sells, or trades in securities

22 for its own account in its capacity as trustee or adminis23 trator of, or otherwise on behalf of or for the account of—

24 (1) a charitable organization;
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1 (2) a fund that is exempt from the Investment

2 Company Act of 1940 under section 3(c)(7) of that

3 Act; or

4 (3) a trust or other donative instrument, the as5 sets of which may be contributed to or invested in

6 such funds in accordance with section 3(c)(7) of the

7 Investment Company Act of 1940, or the settlors (or

8 potential settlors) or beneficiaries of any such trusts

9 or other instruments.

10 (c) STATE ACTION.—Notwithstanding subsections

11 (a) and (b), during the 3-year period beginning on the

12 date of enactment of this Act, a State may enact a statute

13 that specifically refers to this section and provides pro14 spectively that this section shall not preempt the laws of

15 that State referred to in this section.

16 (d) DEFINITIONS.—For purposes of this section—

17 (1) the term ‘‘charitable organization’’ means

18 an organization described in paragraphs (1) through

19 (5) of section 170(c) or section 501(c)(3) of the In20 ternal Revenue Code of 1986;

21 (2) the term ‘‘security’’ has the same meaning

22 as in section 3 of the Securities Exchange Act of

23 1934; and

24 (3) the term ‘‘State’’ means each of the several

25 States of the United States, the District of Colum-
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1 bia, the Commonwealth of Puerto Rico, the Virgin

2 Islands, Guam, American Samoa, and the Common3 wealth of the Northern Mariana Islands.

4 TITLE II—CLARIFICATION OF

5 ANTITRUST LAWS

6 SEC. 201. EXEMPTION FROM ANTITRUST LAWS.

7 (a) IN GENERAL.—The activities of a charitable or8 ganization relating to the issuance, maintenance, or in9 vestment of a charitable gift annuity are exempt from the

10 application of the antitrust laws.

11 (b) DEFINITIONS.—For purposes of this section—

12 (1) the term ‘‘antitrust laws’’ means—

13 (A) the Sherman Act (15 U.S.C. 1 et seq.);

14 (B) the Clayton Act (15 U.S.C. 12 et

15 seq.);

16 (C) the Federal Trade Commission Act (15

17 U.S.C. 41 et seq.); and

18 (D) any State law that is similar to the

19 Acts referred to in subparagraphs (A) through

20 (C).

21 (2) the term ‘‘charitable organization’’ means

22 an organization described in paragraphs (1) through

23 (5) of section 170(c) or section 501(c)(3) of the In24 ternal Revenue Code of 1986;
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1 (3) the term ‘‘charitable gift annuity’’ means an

2 annuity issued by a charitable organization that is

3 described in section 501(m)(5) of the Internal Reve4 nue Code of 1986; and

5 (4) the term ‘‘State’’ means each of the several

6 States of the United States, the District of Colum7 bia, the Commonwealth of Puerto Rico, the Virgin

8 Islands, Guam, American Samoa, and the Common9 wealth of the Northern Mariana Islands.

10 (c) STATE ACTION.—Notwithstanding subsections

11 (a) and (b), during the 3-year period beginning on the

12 date of enactment of this Act, a State may enact a statute

13 that specifically refers to this section and provides pro14 spectively that this section shall not preempt the laws of

15 that State referred to in this section.

16 SEC. 202. EFFECTIVE DATE AND APPLICABILITY.

17 The exemption provided for in section 201 shall apply

18 in any judicial or administrative action pending on or com19 menced after the date of enactment of this Act and shall

20 serve as a defense to any claim that the sale or issuance

21 of a charitable gift annuity is subject to any provision of

22 antitrust laws.

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