Pub.L. 104-63 To modify the operation of the antitrust laws, and of State laws similar to the antitrust laws, with respect to charitable gift annuities. <> ...

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                   PHILANTHROPY PROTECTION ACT OF 1995

[[Page 109 STAT. 682]]

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. <<NOTE: Dec. 8, 1995 -  [H.R. 2519]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Philanthropy 
Protection Act of 1995.>> 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a)  <<NOTE: 15 USC 80a-51 note.>> 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 
                subparagraph (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 
                irrevocably 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

[[Page 109 STAT. 683]]

                charitable organizations, if the ability to revoke the 
                dedication is limited to circumstances involving--
                          ``(I) an adverse change in the financial 
                      circumstances 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 subparagraph (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 
                meaning 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 
                remainder 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 
                annuity 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.--Section 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

[[Page 109 STAT. 684]]

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 Investment 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 
                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''.

    (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 securities 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 provided 
        under paragraph (1) shall not be available to any charitable 
        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

[[Page 109 STAT. 685]]

        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 Investment 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 
        organization, as defined in section 3(c)(10)(D) of the 
        Investment Company 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. <<NOTE: 15 USC 80a-3a.>> 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 
        investment company under section 3(c)(10)(B) of the Investment 
        Company 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.

[[Page 109 STAT. 686]]

    (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 
        organization 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 Commonwealth of 
        Puerto Rico, the Virgin Islands, Guam, American Samoa, and the 
        Commonwealth of the Northern Mariana Islands.

SEC. 7. <<NOTE: 15 USC 77c note.>> 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 regulation preempted as provided in 
section 6 of this Act, except as otherwise specifically provided in such 
Acts or State law.

    Approved December 8, 1995.

LEGISLATIVE HISTORY--H.R. 2519:
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