As Introduced                            1            

123rd General Assembly                                             4            

   Regular Session                               H. B. No. 161     5            

      1999-2000                                                    6            


   REPRESENTATIVES WOMER BENJAMIN-MOTTLEY-TIBERI-HARRIS-BOGGS-     8            

  GERBERRY-JOLIVETTE-METELSKY-CALLENDER-VESPER-HARTNETT-OLMAN-     9            

  TRAKAS-ALLEN-SCHULER-PATTON-O'BRIEN-SULLIVAN-LOGAN-D.MILLER-     10           

  VAN VYVEN-AMSTUTZ-HOLLISTER-CORBIN-VESPER-BENDER-WILLAMOWSKI-    11           

         GOODMAN-JONES-YOUNG-CLANCY-ROMAN-JACOBSON-KREBS           12           


                                                                   13           

                           A   B I L L                                          

             To enact sections 1340.31 to 1340.37 of the Revised   15           

                Code to enact the "Institutional Trust Funds Act"  16           

                to define income and establish spending standards  17           

                for trust assets that are held for the benefit of               

                charities.                                                      




BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:        19           

      Section 1.  That sections 1340.31, 1340.32, 1340.33,         21           

1340.34, 1340.35, 1340.36, and 1340.37 of the Revised Code be      22           

enacted to read as follows:                                                     

      Sec. 1340.31.  AS USED IN SECTIONS 1340.31 TO 1340.37 OF     26           

THE REVISED CODE:                                                               

      (A)  "INSTITUTION" MEANS AN INCORPORATED OR UNINCORPORATED   28           

ORGANIZATION THAT IS ORGANIZED AND OPERATED EXCLUSIVELY FOR        30           

EDUCATIONAL, RELIGIOUS, CHARITABLE, OR OTHER ELEEMOSYNARY          31           

PURPOSES OR A GOVERNMENTAL ORGANIZATION TO THE EXTENT THAT IT      32           

HOLDS FUNDS EXCLUSIVELY FOR ANY OF THOSE PURPOSES.                              

      (B)  "GOVERNING BOARD" MEANS THE BODY RESPONSIBLE FOR THE    34           

MANAGEMENT OF AN INSTITUTION.                                      36           

      (C)  "INSTITUTIONAL TRUST FUND" MEANS A TRUST FUND, OR A     38           

PART OF A TRUST FUND, THAT IS HELD BY A TRUSTEE FOR THE EXCLUSIVE  40           

USE, BENEFIT, OR PURPOSES OF ONE OR MORE INSTITUTIONS AND THAT IS  41           

NOT WHOLLY DISTRIBUTABLE TO THE INSTITUTION OR INSTITUTIONS ON A   42           

                                                          2      

                                                                 
CURRENT BASIS UNDER THE TERMS OF THE APPLICABLE TRUST INSTRUMENT.  43           

"INSTITUTIONAL TRUST FUND" DOES NOT INCLUDE A FUND IN WHICH A      44           

BENEFICIARY THAT IS NOT AN INSTITUTION HAS AN INTEREST OTHER THAN  45           

A RIGHT THAT MAY ARISE UPON A VIOLATION OF A COVENANT UNDER THE                 

TERMS OF THE APPLICABLE TRUST INSTRUMENT OR UPON A VIOLATION OF    46           

OR THE FAILURE OF THE PURPOSES OF THE FUND.                        47           

      (D)  "APPLICABLE FUND VALUE" MEANS FOR ANY PARTICULAR        49           

FISCAL YEAR THE SUM OF THE MONTH-END VALUES OF THE NET ASSETS OF   51           

AN INSTITUTIONAL TRUST FUND FOR THE PRIOR FISCAL YEAR FOR THOSE    52           

MONTHS IN WHICH THE INSTITUTIONAL TRUST FUND HAS BEEN IN           53           

EXISTENCE DURING SUCH PRIOR FISCAL YEAR DIVIDED BY THE NUMBER OF   54           

THOSE MONTHS.  THE MONTH-END VALUES SHALL BE DETERMINED BY THE     55           

TRUSTEE IN ACCORDANCE WITH THE TRUSTEE'S RECORDS, AND ANY SUCH     56           

DETERMINATION MADE BY A TRUSTEE IN GOOD FAITH IS CONCLUSIVE.       57           

      (E)  "TRUST INSTRUMENT" MEANS A TESTAMENTARY OR INTER VIVOS  59           

TRUST UNDER WHICH THE TRUSTEE OF THE TRUST HOLDS AN INSTITUTIONAL  61           

TRUST FUND.                                                                     

      (F)  "TRUSTEE" MEANS AN INDIVIDUAL, CORPORATION,             63           

INSTITUTION, OR ORGANIZATION, INCLUDING, BUT NOT LIMITED TO, A     65           

BANK, TRUST COMPANY, OR OTHER FINANCIAL INSTITUTION, SERVING AS A  66           

TRUSTEE OR AS SOLE TRUSTEE UNDER A TRUST INSTRUMENT.  "TRUSTEE"    68           

INCLUDES AN ORIGINAL TRUSTEE AND ANY SUCCESSOR OR ADDED TRUSTEE.                

      Sec. 1340.32.  (A)  SUBJECT TO DIVISION (D) OF THIS SECTION  72           

AND SECTION 1340.33 OF THE REVISED CODE, DURING ANY FISCAL YEAR    74           

IN WHICH INCOME MAY BE OR IS REQUIRED TO BE DISTRIBUTED TO AN      76           

INSTITUTION FROM AN INSTITUTIONAL TRUST FUND, INCOME MEANS THE                  

GREATER OF THE FOLLOWING:                                          77           

      (1)  THE INCOME FROM THE ASSETS OF THE INSTITUTIONAL TRUST   79           

FUND FOR THE FISCAL YEAR AS DETERMINED IN ACCORDANCE WITH THE      80           

APPLICABLE TRUST INSTRUMENT AND APPLICABLE LAW WITHOUT REGARD TO   81           

SECTIONS 1340.31 TO 1340.37 OF THE REVISED CODE;                   82           

      (2)  THE AMOUNT REQUESTED BY THE INSTITUTION'S GOVERNING     84           

BOARD FOR THE FISCAL YEAR PURSUANT TO DIVISION (B) OF THIS         85           

SECTION.                                                                        

                                                          3      

                                                                 
      (B)  AN INSTITUTION'S GOVERNING BOARD MAY REQUEST THAT AN    87           

AMOUNT BE DISTRIBUTED TO THE INSTITUTION FOR THE FISCAL YEAR, AND  88           

THAT AMOUNT SHALL NOT EXCEED THE SUM OF BOTH OF THE FOLLOWING:     90           

      (1)  FIVE PER CENT OF THE APPLICABLE FUND VALUE FOR THE      92           

INSTITUTIONAL TRUST FUND FOR THE FISCAL YEAR;                      95           

      (2)  IF, IN ANY PRIOR FISCAL YEAR THAT IS AFTER THE          98           

EFFECTIVE DATE OF THIS SECTION, THE GOVERNING BOARD REQUESTED      99           

LESS THAN FIVE PER CENT OF THE APPLICABLE FUND VALUE FOR SUCH      100          

PRIOR FISCAL YEAR AND IF THE AMOUNT THE INSTITUTION ACTUALLY       101          

RECEIVED FROM THE INSTITUTIONAL TRUST FUND PURSUANT TO DIVISION    103          

(A) OF THIS SECTION WAS LESS THAN FIVE PER CENT FOR SUCH PRIOR     104          

FISCAL YEAR, THE AGGREGATE DIFFERENCE BETWEEN FIVE PER CENT OF     105          

THE APPLICABLE FUND VALUE WITH RESPECT TO EACH SUCH PRIOR FISCAL   106          

YEAR AND THE AMOUNT THE INSTITUTION ACTUALLY RECEIVED PURSUANT TO  107          

DIVISION (A) OF THIS SECTION FOR SUCH PRIOR FISCAL YEAR.           108          

      (C)  IF, UNDER A TRUST INSTRUMENT, MORE THAN ONE             110          

INSTITUTION IS A BENEFICIARY OF AN INSTITUTIONAL TRUST FUND, THE   112          

TRUSTEE SHALL TAKE SUCH ACTIONS THAT THE TRUSTEE DETERMINES        113          

APPROPRIATE OR NECESSARY TO ALLOW FOR THE DISTRIBUTIONS OF INCOME               

AS CONTEMPLATED BY DIVISION (A) OF THIS SECTION, WHICH ACTIONS     114          

MAY INCLUDE DIVIDING THE INSTITUTIONAL TRUST FUND INTO SEPARATE    117          

SHARES ACCORDING TO THE INTEREST THAT EACH INSTITUTION HAS IN THE  118          

TOTAL INSTITUTIONAL TRUST FUND HELD UNDER THE TRUST INSTRUMENT.    119          

      (D)  THIS SECTION DOES NOT LIMIT THE AUTHORITY OR            121          

OBLIGATION OF A TRUSTEE TO DISTRIBUTE, OR THE AUTHORITY OF A       123          

GOVERNING BOARD TO REQUEST, FUNDS AS PERMITTED OR REQUIRED UNDER   124          

THE TERMS OF THE APPLICABLE TRUST INSTRUMENT.                      125          

      Sec. 1340.33.  (A)  DIVISION (A) OF SECTION 1340.32 OF THE   129          

REVISED CODE DOES NOT APPLY IF THE APPLICABLE TRUST INSTRUMENT     130          

EXPRESSLY INDICATES THE SETTLOR'S INTENTION THAT INCOME IS TO BE   131          

OTHERWISE THAN AS DEFINED IN DIVISION (A) OF SECTION 1340.32 OF    133          

THE REVISED CODE.                                                               

      (B)  A RESTRICTION UPON THE DEFINITION OF INCOME IN          136          

DIVISION (A) OF SECTION 1340.32 OF THE REVISED CODE MAY NOT BE     140          

                                                          4      

                                                                 
INFERRED FROM A DESIGNATION OF AN INSTITUTIONAL TRUST FUND AS AN   141          

ENDOWMENT; A DIRECTION OR AUTHORIZATION IN THE APPLICABLE TRUST    143          

INSTRUMENT TO USE ONLY "INCOME," "INTEREST," "DIVIDENDS," OR       144          

"RENTS, ISSUES, OR PROFITS," OR "TO PRESERVE THE PRINCIPAL         145          

INTACT," OR A DIRECTION THAT CONTAINS OTHER WORDS OF A SIMILAR     147          

IMPORT; A DIRECTION IN A TRUST INSTRUMENT THAT INCOME AND          148          

PRINCIPAL ARE TO BE DETERMINED BY REFERENCE TO CERTAIN STATUTORY   149          

PROVISIONS; OR, SUBJECT TO DIVISION (A) OF THIS SECTION, THE       153          

INCLUSION OF SPECIFIED PROVISIONS IN A TRUST INSTRUMENT SETTING    154          

FORTH THE WAY IN WHICH INCOME AND PRINCIPAL ARE TO BE DETERMINED.  155          

      (C)  THE RULE OF CONSTRUCTION SET FORTH IN DIVISION (B) OF   159          

THIS SECTION APPLIES TO TRUST INSTRUMENTS EXECUTED OR IN EFFECT                 

BEFORE, ON, OR AFTER THE EFFECTIVE DATE OF THIS SECTION.           160          

      Sec. 1340.34.  (A)  IN ADMINISTERING THE POWERS TO REQUEST   163          

AMOUNTS FROM A TRUSTEE OF AN INSTITUTIONAL TRUST FUND IN           164          

ACCORDANCE WITH DIVISIONS (A) AND (B) OF SECTION 1340.32 OF THE    167          

REVISED CODE, MEMBERS OF A GOVERNING BOARD OF AN INSTITUTION       169          

SHALL EXERCISE ORDINARY BUSINESS CARE AND PRUDENCE UNDER THE       171          

FACTS AND CIRCUMSTANCES PREVAILING AT THE TIME OF THE ACTION OR    172          

DECISION AND SHALL MAKE REQUESTS FOR AMOUNTS UNDER DIVISIONS (A)   173          

AND (B) OF SECTION 1340.32 OF THE REVISED CODE ONLY AS IS PRUDENT  175          

UNDER THIS STANDARD.  IN SO DOING, THE GOVERNING BOARD SHALL       176          

CONSIDER THE LONG- AND SHORT-TERM NEEDS OF THE INSTITUTION IN      177          

CARRYING OUT ITS EDUCATIONAL, RELIGIOUS, CHARITABLE, OR OTHER      178          

ELEEMOSYNARY PURPOSES; THE INSTITUTION'S PRESENT AND ANTICIPATED   179          

FINANCIAL REQUIREMENTS; THE EXPECTED TOTAL RETURN ON THE           180          

INVESTMENTS HELD BY THE INSTITUTION AND HELD BY THE TRUSTEE UNDER  182          

THE APPLICABLE TRUST INSTRUMENT; PRICE LEVEL TRENDS; AND GENERAL                

ECONOMIC CONDITIONS.                                               184          

      (B)  IN DETERMINING THE EXPECTED TOTAL RETURN ON THE         186          

INVESTMENTS HELD BY A TRUSTEE OF AN INSTITUTIONAL TRUST FUND       187          

UNDER THE APPLICABLE TRUST INSTRUMENT, THE MEMBERS OF THE          188          

GOVERNING BOARD OF AN INSTITUTION MAY FOLLOW, AND ARE NOT          189          

REQUIRED TO EXAMINE INDEPENDENTLY, THE DETERMINATION OF THE        190          

                                                          5      

                                                                 
TRUSTEE REGARDING THE EXPECTED TOTAL RETURN ON THE INVESTMENTS     191          

HELD BY THE TRUSTEE.                                                            

      (C)  A TRUSTEE OF AN INSTITUTIONAL TRUST FUND HAS NO DUTY    193          

TO INQUIRE OR ASCERTAIN WHETHER THE GOVERNING BOARD OF AN          195          

INSTITUTION HAS SATISFIED THE STANDARDS SET FORTH IN DIVISIONS     197          

(A) AND (B) OF THIS SECTION, AND THE TRUSTEE DOES NOT HAVE ANY     200          

LIABILITY FOR THE FAILURE OF THE GOVERNING BOARD TO SATISFY THOSE  202          

STANDARDS.                                                                      

      Sec. 1340.35.  NOTHING IN SECTION 2109.67, SECTIONS 1340.01  204          

TO 1340.13, OR ANY OTHER SECTION OF THE REVISED CODE LIMITS OR     209          

RESTRICTS THE DEFINITION OF INCOME IN DIVISION (A) OF SECTION      211          

1340.32 OF THE REVISED CODE OR LIMITS OR RESTRICTS A GOVERNING     214          

BOARD OF AN INSTITUTION FROM REQUESTING, OR A TRUSTEE FROM         215          

MAKING, DISTRIBUTIONS FROM AN INSTITUTIONAL TRUST FUND IN                       

ACCORDANCE WITH SECTIONS 1340.31 TO 1340.37 OF THE REVISED CODE.   218          

      Sec. 1340.36.  (A)  NOTHING IN SECTIONS 1340.31 TO 1340.35   220          

OF THE REVISED CODE AFFECTS THE CONSTRUCTION OR INTERPRETATION OF  223          

SECTIONS 1715.51 TO 1715.59 OF THE REVISED CODE RELATING TO THE    227          

UNIFORM MANAGEMENT OF INSTITUTIONAL FUNDS ACT.  SPECIFICALLY,      228          

NEITHER THE PERCENTAGE SET FORTH IN DIVISION (B) OF SECTION        230          

1340.32 OF THE REVISED CODE NOR THE AMOUNT ACTUALLY REQUESTED BY   233          

A GOVERNING BOARD PURSUANT TO SECTION 1340.32 OF THE REVISED CODE  234          

SHALL BE CONSTRUED OR INTERPRETED TO LIMIT OR EXPAND WHAT IS A     235          

PRUDENT AMOUNT THAT CAN BE EXPENDED BY A GOVERNING BOARD OF AN     237          

INSTITUTION UNDER SECTIONS 1715.51 TO 1715.59 OF THE REVISED       240          

CODE.                                                                           

      (B)  IF AN INSTITUTIONAL TRUST FUND IS ALSO AN               242          

INSTITUTIONAL FUND AS DEFINED IN DIVISION (B) OF SECTION 1715.51   246          

OF THE REVISED CODE WITH THE RESULT THAT SECTIONS 1715.51 TO       249          

1715.59 OF THE REVISED CODE ALSO ARE APPLICABLE TO THE             252          

INSTITUTIONAL TRUST FUND, THEN SECTIONS 1715.51 TO 1715.59 OF THE  253          

REVISED CODE APPLY TO THE INSTITUTIONAL TRUST FUND, AND SECTIONS   256          

1340.31 TO 1340.37 OF THE REVISED CODE DO NOT APPLY TO THE         259          

INSTITUTIONAL TRUST FUND.                                                       

                                                          6      

                                                                 
      Sec. 1340.37.  SECTIONS 1340.31 TO 1340.37 OF THE REVISED    263          

CODE MAY BE CITED AS THE "INSTITUTIONAL TRUST FUNDS ACT."          264