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,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(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:
Sec. 1. Short title; table of contents.
Sec. 2. Amendments to the Investment Company Act of 1940.
Sec. 3. Amendment to the Securities Act of 1933.
Sec. 4. Amendments to the Securities Exchange Act of 1934.
Sec. 5. Amendment of the Investment Advisers Act of 1940.
Sec. 6. Protection of philanthropy under State law.
Sec. 7. Effective dates and applicability.
SEC. 2. AMENDMENTS TO THE INVESTMENT COMPANY ACT OF 1940.
(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 subpara-
graph (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 irrev-
ocably 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
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charitable organizations, if the ability to revoke the dedica-
tion is limited to circumstances involving—
‘‘(I) an adverse change in the financial cir-
cumstances 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 subpara-
graph (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 mean-
ing 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 remain-
der 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 annu-
ity 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.—Sec-
tion 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
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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.’’.
SEC. 3. AMENDMENT TO THE SECURITIES ACT OF 1933.
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 Invest-
ment Company Act of 1940;’’.
SEC. 4. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.
(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 participa-
tion in any pooled income fund, collective trust fund, collec-
tive 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 securi-
ties 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 pro-
vided under paragraph (1) shall not be available to any chari-
table 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
H. R. 2519—4
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 Invest-
ment Company Act of 1940’’.
SEC. 5. AMENDMENT OF THE INVESTMENT ADVISERS ACT OF 1940.
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 organiza-
tion, as defined in section 3(c)(10)(D) of the Investment Com-
pany 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.’’.
SEC. 6. PROTECTION OF PHILANTHROPY UNDER STATE LAW.
(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 invest-
ment company under section 3(c)(10)(B) of the Investment Com-
pany 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.
H. R. 2519—5
(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 organiza-
tion 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 Common-
wealth of Puerto Rico, the Virgin Islands, Guam, American
Samoa, and the Commonwealth of the Northern Mariana
Islands.
SEC. 7. EFFECTIVE DATES AND APPLICABILITY.
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 regula-
tion 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.