As Passed by the Senate 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-SENATORS HOTTINGER-FINGERHUT- 15
PRENTISS-HERINGTON-KEARNS-DRAKE-WATTS-ESPY-SPADA-GARDNER-MUMPER- 16
DiDONATO 17
_________________________________________________________________ 19
A B I L L
To enact sections 1340.31 to 1340.37 of the Revised 21
Code to enact the "Institutional Trust Funds Act" 22
to define income and establish spending standards 23
for trust assets that are held for the benefit of
charities.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 25
Section 1. That sections 1340.31, 1340.32, 1340.33, 27
1340.34, 1340.35, 1340.36, and 1340.37 of the Revised Code be 28
enacted to read as follows:
Sec. 1340.31. AS USED IN SECTIONS 1340.31 TO 1340.37 OF 32
THE REVISED CODE:
(A) "INSTITUTION" MEANS AN INCORPORATED OR UNINCORPORATED 34
ORGANIZATION THAT IS ORGANIZED AND OPERATED EXCLUSIVELY FOR 36
EDUCATIONAL, RELIGIOUS, CHARITABLE, OR OTHER ELEEMOSYNARY 37
PURPOSES OR A GOVERNMENTAL ORGANIZATION TO THE EXTENT THAT IT 38
HOLDS FUNDS EXCLUSIVELY FOR ANY OF THOSE PURPOSES.
(B) "GOVERNING BOARD" MEANS THE BODY RESPONSIBLE FOR THE 40
2
MANAGEMENT OF AN INSTITUTION. 42
(C) "INSTITUTIONAL TRUST FUND" MEANS A TRUST FUND, OR A 44
PART OF A TRUST FUND, THAT IS HELD BY A TRUSTEE FOR THE EXCLUSIVE 46
USE, BENEFIT, OR PURPOSES OF ONE OR MORE INSTITUTIONS AND THAT IS 47
NOT WHOLLY DISTRIBUTABLE TO THE INSTITUTION OR INSTITUTIONS ON A 48
CURRENT BASIS UNDER THE TERMS OF THE APPLICABLE TRUST INSTRUMENT. 49
"INSTITUTIONAL TRUST FUND" DOES NOT INCLUDE A FUND IN WHICH A 50
BENEFICIARY THAT IS NOT AN INSTITUTION HAS AN INTEREST OTHER THAN 51
A RIGHT THAT MAY ARISE UPON A VIOLATION OF A COVENANT UNDER THE
TERMS OF THE APPLICABLE TRUST INSTRUMENT OR UPON A VIOLATION OF 52
OR THE FAILURE OF THE PURPOSES OF THE FUND. 53
(D) "APPLICABLE FUND VALUE" MEANS FOR ANY PARTICULAR 55
FISCAL YEAR THE SUM OF THE MONTH-END VALUES OF THE NET ASSETS OF 57
AN INSTITUTIONAL TRUST FUND FOR THE PRIOR FISCAL YEAR FOR THOSE 58
MONTHS IN WHICH THE INSTITUTIONAL TRUST FUND HAS BEEN IN 59
EXISTENCE DURING SUCH PRIOR FISCAL YEAR DIVIDED BY THE NUMBER OF 60
THOSE MONTHS. THE MONTH-END VALUES SHALL BE DETERMINED BY THE 61
TRUSTEE IN ACCORDANCE WITH THE TRUSTEE'S RECORDS, AND ANY SUCH 62
DETERMINATION MADE BY A TRUSTEE IN GOOD FAITH IS CONCLUSIVE. 63
(E) "TRUST INSTRUMENT" MEANS A TESTAMENTARY OR INTER VIVOS 65
TRUST UNDER WHICH THE TRUSTEE OF THE TRUST HOLDS AN INSTITUTIONAL 67
TRUST FUND.
(F) "TRUSTEE" MEANS AN INDIVIDUAL, CORPORATION, 69
INSTITUTION, OR ORGANIZATION, INCLUDING, BUT NOT LIMITED TO, A 71
BANK, TRUST COMPANY, OR OTHER FINANCIAL INSTITUTION, SERVING AS A 72
TRUSTEE OR AS SOLE TRUSTEE UNDER A TRUST INSTRUMENT. "TRUSTEE" 74
INCLUDES AN ORIGINAL TRUSTEE AND ANY SUCCESSOR OR ADDED TRUSTEE.
Sec. 1340.32. (A) SUBJECT TO DIVISION (D) OF THIS SECTION 78
AND SECTION 1340.33 OF THE REVISED CODE, DURING ANY FISCAL YEAR 80
IN WHICH INCOME MAY BE OR IS REQUIRED TO BE DISTRIBUTED TO AN 82
INSTITUTION FROM AN INSTITUTIONAL TRUST FUND, INCOME MEANS THE
GREATER OF THE FOLLOWING: 83
(1) THE INCOME FROM THE ASSETS OF THE INSTITUTIONAL TRUST 85
FUND FOR THE FISCAL YEAR AS DETERMINED IN ACCORDANCE WITH THE 86
3
APPLICABLE TRUST INSTRUMENT AND APPLICABLE LAW WITHOUT REGARD TO 87
SECTIONS 1340.31 TO 1340.37 OF THE REVISED CODE; 88
(2) THE AMOUNT REQUESTED BY THE INSTITUTION'S GOVERNING 90
BOARD FOR THE FISCAL YEAR PURSUANT TO DIVISION (B) OF THIS 91
SECTION.
(B) AN INSTITUTION'S GOVERNING BOARD MAY REQUEST THAT AN 93
AMOUNT BE DISTRIBUTED TO THE INSTITUTION FOR THE FISCAL YEAR, AND 94
THAT AMOUNT SHALL NOT EXCEED THE SUM OF BOTH OF THE FOLLOWING: 96
(1) FIVE PER CENT OF THE APPLICABLE FUND VALUE FOR THE 98
INSTITUTIONAL TRUST FUND FOR THE FISCAL YEAR; 101
(2) IF, IN ANY PRIOR FISCAL YEAR THAT IS AFTER THE 104
EFFECTIVE DATE OF THIS SECTION, THE GOVERNING BOARD REQUESTED 105
LESS THAN FIVE PER CENT OF THE APPLICABLE FUND VALUE FOR SUCH 106
PRIOR FISCAL YEAR AND IF THE AMOUNT THE INSTITUTION ACTUALLY 107
RECEIVED FROM THE INSTITUTIONAL TRUST FUND PURSUANT TO DIVISION 109
(A) OF THIS SECTION WAS LESS THAN FIVE PER CENT FOR SUCH PRIOR 110
FISCAL YEAR, THE AGGREGATE DIFFERENCE BETWEEN FIVE PER CENT OF 111
THE APPLICABLE FUND VALUE WITH RESPECT TO EACH SUCH PRIOR FISCAL 112
YEAR AND THE AMOUNT THE INSTITUTION ACTUALLY RECEIVED PURSUANT TO 113
DIVISION (A) OF THIS SECTION FOR SUCH PRIOR FISCAL YEAR. 114
(C) IF, UNDER A TRUST INSTRUMENT, MORE THAN ONE 116
INSTITUTION IS A BENEFICIARY OF AN INSTITUTIONAL TRUST FUND, THE 118
TRUSTEE SHALL TAKE SUCH ACTIONS THAT THE TRUSTEE DETERMINES 119
APPROPRIATE OR NECESSARY TO ALLOW FOR THE DISTRIBUTIONS OF INCOME
AS CONTEMPLATED BY DIVISION (A) OF THIS SECTION, WHICH ACTIONS 120
MAY INCLUDE DIVIDING THE INSTITUTIONAL TRUST FUND INTO SEPARATE 123
SHARES ACCORDING TO THE INTEREST THAT EACH INSTITUTION HAS IN THE 124
TOTAL INSTITUTIONAL TRUST FUND HELD UNDER THE TRUST INSTRUMENT. 125
(D) THIS SECTION DOES NOT LIMIT THE AUTHORITY OR 127
OBLIGATION OF A TRUSTEE TO DISTRIBUTE, OR THE AUTHORITY OF A 129
GOVERNING BOARD TO REQUEST, FUNDS AS PERMITTED OR REQUIRED UNDER 130
THE TERMS OF THE APPLICABLE TRUST INSTRUMENT. 131
Sec. 1340.33. (A) DIVISION (A) OF SECTION 1340.32 OF THE 135
REVISED CODE DOES NOT APPLY IF THE APPLICABLE TRUST INSTRUMENT 136
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EXPRESSLY INDICATES THE SETTLOR'S INTENTION THAT INCOME IS TO BE 137
OTHERWISE THAN AS DEFINED IN DIVISION (A) OF SECTION 1340.32 OF 139
THE REVISED CODE.
(B) A RESTRICTION UPON THE DEFINITION OF INCOME IN 142
DIVISION (A) OF SECTION 1340.32 OF THE REVISED CODE MAY NOT BE 146
INFERRED FROM A DESIGNATION OF AN INSTITUTIONAL TRUST FUND AS AN 147
ENDOWMENT; A DIRECTION OR AUTHORIZATION IN THE APPLICABLE TRUST 149
INSTRUMENT TO USE ONLY "INCOME," "INTEREST," "DIVIDENDS," OR 150
"RENTS, ISSUES, OR PROFITS," OR "TO PRESERVE THE PRINCIPAL 151
INTACT," OR A DIRECTION THAT CONTAINS OTHER WORDS OF A SIMILAR 153
IMPORT; A DIRECTION IN A TRUST INSTRUMENT THAT INCOME AND 154
PRINCIPAL ARE TO BE DETERMINED BY REFERENCE TO CERTAIN STATUTORY 155
PROVISIONS; OR, SUBJECT TO DIVISION (A) OF THIS SECTION, THE 159
INCLUSION OF SPECIFIED PROVISIONS IN A TRUST INSTRUMENT SETTING 160
FORTH THE WAY IN WHICH INCOME AND PRINCIPAL ARE TO BE DETERMINED. 161
(C) THE RULE OF CONSTRUCTION SET FORTH IN DIVISION (B) OF 165
THIS SECTION APPLIES TO TRUST INSTRUMENTS EXECUTED OR IN EFFECT
BEFORE, ON, OR AFTER THE EFFECTIVE DATE OF THIS SECTION. 166
Sec. 1340.34. (A) IN ADMINISTERING THE POWERS TO REQUEST 169
AMOUNTS FROM A TRUSTEE OF AN INSTITUTIONAL TRUST FUND IN 170
ACCORDANCE WITH DIVISIONS (A) AND (B) OF SECTION 1340.32 OF THE 173
REVISED CODE, MEMBERS OF A GOVERNING BOARD OF AN INSTITUTION 175
SHALL EXERCISE ORDINARY BUSINESS CARE AND PRUDENCE UNDER THE 177
FACTS AND CIRCUMSTANCES PREVAILING AT THE TIME OF THE ACTION OR 178
DECISION AND SHALL MAKE REQUESTS FOR AMOUNTS UNDER DIVISIONS (A) 179
AND (B) OF SECTION 1340.32 OF THE REVISED CODE ONLY AS IS PRUDENT 181
UNDER THIS STANDARD. IN SO DOING, THE GOVERNING BOARD SHALL 182
CONSIDER THE LONG- AND SHORT-TERM NEEDS OF THE INSTITUTION IN 183
CARRYING OUT ITS EDUCATIONAL, RELIGIOUS, CHARITABLE, OR OTHER 184
ELEEMOSYNARY PURPOSES; THE INSTITUTION'S PRESENT AND ANTICIPATED 185
FINANCIAL REQUIREMENTS; THE EXPECTED TOTAL RETURN ON THE 186
INVESTMENTS HELD BY THE INSTITUTION AND HELD BY THE TRUSTEE UNDER 188
THE APPLICABLE TRUST INSTRUMENT; PRICE LEVEL TRENDS; AND GENERAL
ECONOMIC CONDITIONS. 190
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(B) IN DETERMINING THE EXPECTED TOTAL RETURN ON THE 192
INVESTMENTS HELD BY A TRUSTEE OF AN INSTITUTIONAL TRUST FUND 193
UNDER THE APPLICABLE TRUST INSTRUMENT, THE MEMBERS OF THE 194
GOVERNING BOARD OF AN INSTITUTION MAY FOLLOW, AND ARE NOT 195
REQUIRED TO EXAMINE INDEPENDENTLY, THE DETERMINATION OF THE 196
TRUSTEE REGARDING THE EXPECTED TOTAL RETURN ON THE INVESTMENTS 197
HELD BY THE TRUSTEE.
(C) A TRUSTEE OF AN INSTITUTIONAL TRUST FUND HAS NO DUTY 199
TO INQUIRE OR ASCERTAIN WHETHER THE GOVERNING BOARD OF AN 201
INSTITUTION HAS SATISFIED THE STANDARDS SET FORTH IN DIVISIONS 203
(A) AND (B) OF THIS SECTION, AND THE TRUSTEE DOES NOT HAVE ANY 206
LIABILITY FOR THE FAILURE OF THE GOVERNING BOARD TO SATISFY THOSE 208
STANDARDS.
Sec. 1340.35. NOTHING IN SECTION 2109.67, SECTIONS 1340.01 210
TO 1340.13, OR ANY OTHER SECTION OF THE REVISED CODE LIMITS OR 215
RESTRICTS THE DEFINITION OF INCOME IN DIVISION (A) OF SECTION 217
1340.32 OF THE REVISED CODE OR LIMITS OR RESTRICTS A GOVERNING 220
BOARD OF AN INSTITUTION FROM REQUESTING, OR A TRUSTEE FROM 221
MAKING, DISTRIBUTIONS FROM AN INSTITUTIONAL TRUST FUND IN
ACCORDANCE WITH SECTIONS 1340.31 TO 1340.37 OF THE REVISED CODE. 224
Sec. 1340.36. (A) NOTHING IN SECTIONS 1340.31 TO 1340.35 226
OF THE REVISED CODE AFFECTS THE CONSTRUCTION OR INTERPRETATION OF 229
SECTIONS 1715.51 TO 1715.59 OF THE REVISED CODE RELATING TO THE 233
UNIFORM MANAGEMENT OF INSTITUTIONAL FUNDS ACT. SPECIFICALLY, 234
NEITHER THE PERCENTAGE SET FORTH IN DIVISION (B) OF SECTION 236
1340.32 OF THE REVISED CODE NOR THE AMOUNT ACTUALLY REQUESTED BY 239
A GOVERNING BOARD PURSUANT TO SECTION 1340.32 OF THE REVISED CODE 240
SHALL BE CONSTRUED OR INTERPRETED TO LIMIT OR EXPAND WHAT IS A 241
PRUDENT AMOUNT THAT CAN BE EXPENDED BY A GOVERNING BOARD OF AN 243
INSTITUTION UNDER SECTIONS 1715.51 TO 1715.59 OF THE REVISED 246
CODE.
(B) IF AN INSTITUTIONAL TRUST FUND IS ALSO AN 248
INSTITUTIONAL FUND AS DEFINED IN DIVISION (B) OF SECTION 1715.51 252
OF THE REVISED CODE WITH THE RESULT THAT SECTIONS 1715.51 TO 255
6
1715.59 OF THE REVISED CODE ALSO ARE APPLICABLE TO THE 258
INSTITUTIONAL TRUST FUND, THEN SECTIONS 1715.51 TO 1715.59 OF THE 259
REVISED CODE APPLY TO THE INSTITUTIONAL TRUST FUND, AND SECTIONS 262
1340.31 TO 1340.37 OF THE REVISED CODE DO NOT APPLY TO THE 265
INSTITUTIONAL TRUST FUND.
Sec. 1340.37. SECTIONS 1340.31 TO 1340.37 OF THE REVISED 269
CODE MAY BE CITED AS THE "INSTITUTIONAL TRUST FUNDS ACT." 270