PHILANTHROPY PROTECTION ACT OF 1995

?681

PUBLIC LAW 104–62—DEC. 8, 1995

109 STAT. 682 PUBLIC LAW 104–62—DEC. 8, 1995

Public Law 104–62

104th Congress

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) S

HORT

ITLE

.—This Act may be cited as the ‘‘Philanthropy

Protection Act of 1995’’.

(b) T

ABLE OF

ONTENTS

.—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) E

XEMPTION

.—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

15 USC 80a–51

note.

Philanthropy

Protection Act of

1995.

Dec. 8, 1995

[H.R. 2519]

109 STAT. 683PUBLIC LAW 104–62—DEC. 8, 1995

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) D

ISCLOSURE BY

XEMPT

HARITABLE

RGANIZATIONS

.—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) D

ISCLOSURE BY

XEMPT

HARITABLE

RGANIZATIONS

.—

Each fund that is excluded from the definition of an investment

company under section 3(c)(10)(B) of this Act shall provide, to

109 STAT. 684 PUBLIC LAW 104–62—DEC. 8, 1995

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) E

XEMPTED

ECURITIES

.—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) E

XEMPTION

ROM

ROKER

-D

EALER

ROVISIONS

.—Section 3

of such Act (15 U.S.C. 78c) is amended by adding at the end

the following new subsection:

‘‘(e) C

HARITABLE

RGANIZATIONS

.—

‘‘(1) E

XEMPTION

.—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) L

IMITATION 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

109 STAT. 685PUBLIC LAW 104–62—DEC. 8, 1995

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) C

ONFORMING

MENDMENT

.—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) R

EGISTRATION

EQUIREMENTS

.—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) T

REATMENT OF

HARITABLE

RGANIZATIONS

.—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.

15 USC 80a–3a.

109 STAT. 686 PUBLIC LAW 104–62—DEC. 8, 1995

LEGISLATIVE HISTORY—H.R. 2519:

HOUSE REPORTS: No. 104–333 (Comm. on Commerce).

CONGRESSIONAL RECORD, Vol. 141 (1995):

Nov. 28, considered and passed House.

Nov. 29, considered and passed Senate.

TATE

CTION

.—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) D

EFINITIONS

.—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.

Approved December 8, 1995.

15 USC 77c note.