I
103D CONGRESS
1ST SESSION
H. R. 2612
To amend the Internal Revenue Code of 1986 with respect to the treatment
of certain charitable risk pools.
IN THE HOUSE OF REPRESENTATIVES
JULY 1, 1993
Mr. STARK (for himself and Mr. FARR of California) 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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
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 redesig-
nating 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 op-
erated 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 char-
itable risk pool’ means any organization—
‘‘(A) which is organized and operated sole-
ly to pool insurable risks of its members (other
than risks related to medical malpractice) and
to provide information to its members with re-
spect 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 subpara-
graph (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 re-
quirements of paragraph (3).
‘‘(3) ORGANIZATIONAL
REQUIREMENTS.—An
organization (hereinafter in this subsection referred
to as the ‘risk pool’) meets the organizational re-
quirements of this paragraph if—
‘‘(A) such risk pool is organized as a non-
profit organization under State law provisions
authorizing risk pooling arrangements for chari-
table organizations,
‘‘(B) such risk pool is exempt from any in-
come tax imposed by the State (or will be so ex-
empt after such pool qualifies as an organiza-
tion 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 con-
tinue at all times to be an organization de-
scribed in subsection (c)(3) and exempt
from tax under subsection (a),
‘‘(ii) any member which receives a
final determination that it no longer quali-
fies as an organization described in sub-
section (c)(3) shall immediately notify the
pool of such determination and the effec-
tive 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 re-
spect to events occurring after the date
such final determination was issued to the
insured.
An organization shall not cease to qualify as a quali-
fied charitable risk pool solely by reason of the fail-
ure of any of its members to continue to be an orga-
nization 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 ‘start-
up capital’ means any capital contributed to,
and any program-related investments (within
the meaning of section 4944(c)) made in, the