As Passed by the House 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- 11
VAN VYVEN-HOLLISTER-CORBIN-BENDER-WILLAMOWSKI-GOODMAN-JONES-
YOUNG-CLANCY-ROMAN-JACOBSON-EVANS-MAIER-SULZER-SALERNO-GARDNER- 12
MYERS-BUCHY-VERICH-DePIERO-BARNES-COUGHLIN-DAMSCHRODER-FLANNERY- 13
TERWILLEGER-THOMAS-CAREY-PERZ-AUSTRIA-BRITTON-BARRETT-MEAD- 14
WILSON-HOOPS-OPFER 15
_________________________________________________________________ 16
A B I L L
To enact sections 1340.31 to 1340.37 of the Revised 18
Code to enact the "Institutional Trust Funds Act" 19
to define income and establish spending standards 20
for trust assets that are held for the benefit of
charities.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 22
Section 1. That sections 1340.31, 1340.32, 1340.33, 24
1340.34, 1340.35, 1340.36, and 1340.37 of the Revised Code be 25
enacted to read as follows:
Sec. 1340.31. AS USED IN SECTIONS 1340.31 TO 1340.37 OF 29
THE REVISED CODE:
(A) "INSTITUTION" MEANS AN INCORPORATED OR UNINCORPORATED 31
ORGANIZATION THAT IS ORGANIZED AND OPERATED EXCLUSIVELY FOR 33
EDUCATIONAL, RELIGIOUS, CHARITABLE, OR OTHER ELEEMOSYNARY 34
PURPOSES OR A GOVERNMENTAL ORGANIZATION TO THE EXTENT THAT IT 35
HOLDS FUNDS EXCLUSIVELY FOR ANY OF THOSE PURPOSES.
(B) "GOVERNING BOARD" MEANS THE BODY RESPONSIBLE FOR THE 37
MANAGEMENT OF AN INSTITUTION. 39
(C) "INSTITUTIONAL TRUST FUND" MEANS A TRUST FUND, OR A 41
2
PART OF A TRUST FUND, THAT IS HELD BY A TRUSTEE FOR THE EXCLUSIVE 43
USE, BENEFIT, OR PURPOSES OF ONE OR MORE INSTITUTIONS AND THAT IS 44
NOT WHOLLY DISTRIBUTABLE TO THE INSTITUTION OR INSTITUTIONS ON A 45
CURRENT BASIS UNDER THE TERMS OF THE APPLICABLE TRUST INSTRUMENT. 46
"INSTITUTIONAL TRUST FUND" DOES NOT INCLUDE A FUND IN WHICH A 47
BENEFICIARY THAT IS NOT AN INSTITUTION HAS AN INTEREST OTHER THAN 48
A RIGHT THAT MAY ARISE UPON A VIOLATION OF A COVENANT UNDER THE
TERMS OF THE APPLICABLE TRUST INSTRUMENT OR UPON A VIOLATION OF 49
OR THE FAILURE OF THE PURPOSES OF THE FUND. 50
(D) "APPLICABLE FUND VALUE" MEANS FOR ANY PARTICULAR 52
FISCAL YEAR THE SUM OF THE MONTH-END VALUES OF THE NET ASSETS OF 54
AN INSTITUTIONAL TRUST FUND FOR THE PRIOR FISCAL YEAR FOR THOSE 55
MONTHS IN WHICH THE INSTITUTIONAL TRUST FUND HAS BEEN IN 56
EXISTENCE DURING SUCH PRIOR FISCAL YEAR DIVIDED BY THE NUMBER OF 57
THOSE MONTHS. THE MONTH-END VALUES SHALL BE DETERMINED BY THE 58
TRUSTEE IN ACCORDANCE WITH THE TRUSTEE'S RECORDS, AND ANY SUCH 59
DETERMINATION MADE BY A TRUSTEE IN GOOD FAITH IS CONCLUSIVE. 60
(E) "TRUST INSTRUMENT" MEANS A TESTAMENTARY OR INTER VIVOS 62
TRUST UNDER WHICH THE TRUSTEE OF THE TRUST HOLDS AN INSTITUTIONAL 64
TRUST FUND.
(F) "TRUSTEE" MEANS AN INDIVIDUAL, CORPORATION, 66
INSTITUTION, OR ORGANIZATION, INCLUDING, BUT NOT LIMITED TO, A 68
BANK, TRUST COMPANY, OR OTHER FINANCIAL INSTITUTION, SERVING AS A 69
TRUSTEE OR AS SOLE TRUSTEE UNDER A TRUST INSTRUMENT. "TRUSTEE" 71
INCLUDES AN ORIGINAL TRUSTEE AND ANY SUCCESSOR OR ADDED TRUSTEE.
Sec. 1340.32. (A) SUBJECT TO DIVISION (D) OF THIS SECTION 75
AND SECTION 1340.33 OF THE REVISED CODE, DURING ANY FISCAL YEAR 77
IN WHICH INCOME MAY BE OR IS REQUIRED TO BE DISTRIBUTED TO AN 79
INSTITUTION FROM AN INSTITUTIONAL TRUST FUND, INCOME MEANS THE
GREATER OF THE FOLLOWING: 80
(1) THE INCOME FROM THE ASSETS OF THE INSTITUTIONAL TRUST 82
FUND FOR THE FISCAL YEAR AS DETERMINED IN ACCORDANCE WITH THE 83
APPLICABLE TRUST INSTRUMENT AND APPLICABLE LAW WITHOUT REGARD TO 84
SECTIONS 1340.31 TO 1340.37 OF THE REVISED CODE; 85
3
(2) THE AMOUNT REQUESTED BY THE INSTITUTION'S GOVERNING 87
BOARD FOR THE FISCAL YEAR PURSUANT TO DIVISION (B) OF THIS 88
SECTION.
(B) AN INSTITUTION'S GOVERNING BOARD MAY REQUEST THAT AN 90
AMOUNT BE DISTRIBUTED TO THE INSTITUTION FOR THE FISCAL YEAR, AND 91
THAT AMOUNT SHALL NOT EXCEED THE SUM OF BOTH OF THE FOLLOWING: 93
(1) FIVE PER CENT OF THE APPLICABLE FUND VALUE FOR THE 95
INSTITUTIONAL TRUST FUND FOR THE FISCAL YEAR; 98
(2) IF, IN ANY PRIOR FISCAL YEAR THAT IS AFTER THE 101
EFFECTIVE DATE OF THIS SECTION, THE GOVERNING BOARD REQUESTED 102
LESS THAN FIVE PER CENT OF THE APPLICABLE FUND VALUE FOR SUCH 103
PRIOR FISCAL YEAR AND IF THE AMOUNT THE INSTITUTION ACTUALLY 104
RECEIVED FROM THE INSTITUTIONAL TRUST FUND PURSUANT TO DIVISION 106
(A) OF THIS SECTION WAS LESS THAN FIVE PER CENT FOR SUCH PRIOR 107
FISCAL YEAR, THE AGGREGATE DIFFERENCE BETWEEN FIVE PER CENT OF 108
THE APPLICABLE FUND VALUE WITH RESPECT TO EACH SUCH PRIOR FISCAL 109
YEAR AND THE AMOUNT THE INSTITUTION ACTUALLY RECEIVED PURSUANT TO 110
DIVISION (A) OF THIS SECTION FOR SUCH PRIOR FISCAL YEAR. 111
(C) IF, UNDER A TRUST INSTRUMENT, MORE THAN ONE 113
INSTITUTION IS A BENEFICIARY OF AN INSTITUTIONAL TRUST FUND, THE 115
TRUSTEE SHALL TAKE SUCH ACTIONS THAT THE TRUSTEE DETERMINES 116
APPROPRIATE OR NECESSARY TO ALLOW FOR THE DISTRIBUTIONS OF INCOME
AS CONTEMPLATED BY DIVISION (A) OF THIS SECTION, WHICH ACTIONS 117
MAY INCLUDE DIVIDING THE INSTITUTIONAL TRUST FUND INTO SEPARATE 120
SHARES ACCORDING TO THE INTEREST THAT EACH INSTITUTION HAS IN THE 121
TOTAL INSTITUTIONAL TRUST FUND HELD UNDER THE TRUST INSTRUMENT. 122
(D) THIS SECTION DOES NOT LIMIT THE AUTHORITY OR 124
OBLIGATION OF A TRUSTEE TO DISTRIBUTE, OR THE AUTHORITY OF A 126
GOVERNING BOARD TO REQUEST, FUNDS AS PERMITTED OR REQUIRED UNDER 127
THE TERMS OF THE APPLICABLE TRUST INSTRUMENT. 128
Sec. 1340.33. (A) DIVISION (A) OF SECTION 1340.32 OF THE 132
REVISED CODE DOES NOT APPLY IF THE APPLICABLE TRUST INSTRUMENT 133
EXPRESSLY INDICATES THE SETTLOR'S INTENTION THAT INCOME IS TO BE 134
OTHERWISE THAN AS DEFINED IN DIVISION (A) OF SECTION 1340.32 OF 136
4
THE REVISED CODE.
(B) A RESTRICTION UPON THE DEFINITION OF INCOME IN 139
DIVISION (A) OF SECTION 1340.32 OF THE REVISED CODE MAY NOT BE 143
INFERRED FROM A DESIGNATION OF AN INSTITUTIONAL TRUST FUND AS AN 144
ENDOWMENT; A DIRECTION OR AUTHORIZATION IN THE APPLICABLE TRUST 146
INSTRUMENT TO USE ONLY "INCOME," "INTEREST," "DIVIDENDS," OR 147
"RENTS, ISSUES, OR PROFITS," OR "TO PRESERVE THE PRINCIPAL 148
INTACT," OR A DIRECTION THAT CONTAINS OTHER WORDS OF A SIMILAR 150
IMPORT; A DIRECTION IN A TRUST INSTRUMENT THAT INCOME AND 151
PRINCIPAL ARE TO BE DETERMINED BY REFERENCE TO CERTAIN STATUTORY 152
PROVISIONS; OR, SUBJECT TO DIVISION (A) OF THIS SECTION, THE 156
INCLUSION OF SPECIFIED PROVISIONS IN A TRUST INSTRUMENT SETTING 157
FORTH THE WAY IN WHICH INCOME AND PRINCIPAL ARE TO BE DETERMINED. 158
(C) THE RULE OF CONSTRUCTION SET FORTH IN DIVISION (B) OF 162
THIS SECTION APPLIES TO TRUST INSTRUMENTS EXECUTED OR IN EFFECT
BEFORE, ON, OR AFTER THE EFFECTIVE DATE OF THIS SECTION. 163
Sec. 1340.34. (A) IN ADMINISTERING THE POWERS TO REQUEST 166
AMOUNTS FROM A TRUSTEE OF AN INSTITUTIONAL TRUST FUND IN 167
ACCORDANCE WITH DIVISIONS (A) AND (B) OF SECTION 1340.32 OF THE 170
REVISED CODE, MEMBERS OF A GOVERNING BOARD OF AN INSTITUTION 172
SHALL EXERCISE ORDINARY BUSINESS CARE AND PRUDENCE UNDER THE 174
FACTS AND CIRCUMSTANCES PREVAILING AT THE TIME OF THE ACTION OR 175
DECISION AND SHALL MAKE REQUESTS FOR AMOUNTS UNDER DIVISIONS (A) 176
AND (B) OF SECTION 1340.32 OF THE REVISED CODE ONLY AS IS PRUDENT 178
UNDER THIS STANDARD. IN SO DOING, THE GOVERNING BOARD SHALL 179
CONSIDER THE LONG- AND SHORT-TERM NEEDS OF THE INSTITUTION IN 180
CARRYING OUT ITS EDUCATIONAL, RELIGIOUS, CHARITABLE, OR OTHER 181
ELEEMOSYNARY PURPOSES; THE INSTITUTION'S PRESENT AND ANTICIPATED 182
FINANCIAL REQUIREMENTS; THE EXPECTED TOTAL RETURN ON THE 183
INVESTMENTS HELD BY THE INSTITUTION AND HELD BY THE TRUSTEE UNDER 185
THE APPLICABLE TRUST INSTRUMENT; PRICE LEVEL TRENDS; AND GENERAL
ECONOMIC CONDITIONS. 187
(B) IN DETERMINING THE EXPECTED TOTAL RETURN ON THE 189
INVESTMENTS HELD BY A TRUSTEE OF AN INSTITUTIONAL TRUST FUND 190
5
UNDER THE APPLICABLE TRUST INSTRUMENT, THE MEMBERS OF THE 191
GOVERNING BOARD OF AN INSTITUTION MAY FOLLOW, AND ARE NOT 192
REQUIRED TO EXAMINE INDEPENDENTLY, THE DETERMINATION OF THE 193
TRUSTEE REGARDING THE EXPECTED TOTAL RETURN ON THE INVESTMENTS 194
HELD BY THE TRUSTEE.
(C) A TRUSTEE OF AN INSTITUTIONAL TRUST FUND HAS NO DUTY 196
TO INQUIRE OR ASCERTAIN WHETHER THE GOVERNING BOARD OF AN 198
INSTITUTION HAS SATISFIED THE STANDARDS SET FORTH IN DIVISIONS 200
(A) AND (B) OF THIS SECTION, AND THE TRUSTEE DOES NOT HAVE ANY 203
LIABILITY FOR THE FAILURE OF THE GOVERNING BOARD TO SATISFY THOSE 205
STANDARDS.
Sec. 1340.35. NOTHING IN SECTION 2109.67, SECTIONS 1340.01 207
TO 1340.13, OR ANY OTHER SECTION OF THE REVISED CODE LIMITS OR 212
RESTRICTS THE DEFINITION OF INCOME IN DIVISION (A) OF SECTION 214
1340.32 OF THE REVISED CODE OR LIMITS OR RESTRICTS A GOVERNING 217
BOARD OF AN INSTITUTION FROM REQUESTING, OR A TRUSTEE FROM 218
MAKING, DISTRIBUTIONS FROM AN INSTITUTIONAL TRUST FUND IN
ACCORDANCE WITH SECTIONS 1340.31 TO 1340.37 OF THE REVISED CODE. 221
Sec. 1340.36. (A) NOTHING IN SECTIONS 1340.31 TO 1340.35 223
OF THE REVISED CODE AFFECTS THE CONSTRUCTION OR INTERPRETATION OF 226
SECTIONS 1715.51 TO 1715.59 OF THE REVISED CODE RELATING TO THE 230
UNIFORM MANAGEMENT OF INSTITUTIONAL FUNDS ACT. SPECIFICALLY, 231
NEITHER THE PERCENTAGE SET FORTH IN DIVISION (B) OF SECTION 233
1340.32 OF THE REVISED CODE NOR THE AMOUNT ACTUALLY REQUESTED BY 236
A GOVERNING BOARD PURSUANT TO SECTION 1340.32 OF THE REVISED CODE 237
SHALL BE CONSTRUED OR INTERPRETED TO LIMIT OR EXPAND WHAT IS A 238
PRUDENT AMOUNT THAT CAN BE EXPENDED BY A GOVERNING BOARD OF AN 240
INSTITUTION UNDER SECTIONS 1715.51 TO 1715.59 OF THE REVISED 243
CODE.
(B) IF AN INSTITUTIONAL TRUST FUND IS ALSO AN 245
INSTITUTIONAL FUND AS DEFINED IN DIVISION (B) OF SECTION 1715.51 249
OF THE REVISED CODE WITH THE RESULT THAT SECTIONS 1715.51 TO 252
1715.59 OF THE REVISED CODE ALSO ARE APPLICABLE TO THE 255
INSTITUTIONAL TRUST FUND, THEN SECTIONS 1715.51 TO 1715.59 OF THE 256
6
REVISED CODE APPLY TO THE INSTITUTIONAL TRUST FUND, AND SECTIONS 259
1340.31 TO 1340.37 OF THE REVISED CODE DO NOT APPLY TO THE 262
INSTITUTIONAL TRUST FUND.
Sec. 1340.37. SECTIONS 1340.31 TO 1340.37 OF THE REVISED 266
CODE MAY BE CITED AS THE "INSTITUTIONAL TRUST FUNDS ACT." 267