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(123rd General Assembly)(House Bill Number 161)
To enact sections 1340.31 to 1340.37 of the Revised Code to enact the
"Institutional Trust Funds Act" to define income and establish spending
standards for trust assets that are held for the benefit of charities.
Be it enacted by the General Assembly of the State of Ohio:
SECTION 1 . That sections 1340.31, 1340.32, 1340.33, 1340.34, 1340.35, 1340.36,
and 1340.37 of the Revised Code be enacted to read as follows:
Sec. 1340.31. As used in sections 1340.31 to
of the Revised Code:
(A) "Institution" means an incorporated or unincorporated
organization that is
organized and operated exclusively for educational, RELIGiOUS, charitable, or
other eleemosynary purposes or a governmental organization to the extent that
it holds funds exclusively for any of those purposes.
(B) "Governing Board" means the body responsible for the
management of an
(C) "Institutional trust fund" means a trust fund, or a part of
a trust fund, that
is held by a trustee for the exclusive use, benefit, or purposes of
one or more institutions and that is not wholly distributable to the
institution or institutions on a current basis under the terms of the
applicable trust instrument. "Institutional trust fund" does not include a
fund in which a beneficiary that is not an institution has an interest other
than a right that may arise upon a violation of a covenant under the terms of
the applicable trust instrument or upon a violation of or the failure of the
purposes of the fund.
(D) "Applicable Fund Value" means for any particular fiscal year
the sum of the
month-end values of the net assets of an institutional trust fund for the
prior fiscal year for those
months in which The institutional trust fund has been in existence during such
prior fiscal year divided by the number of those months. The month-end values
shall be determined by the trustee in accordance with the trustee's records,
and any such determination made by a trustee in good faith is
(E) "Trust instrument" means a testamentary or inter vivos trust
under which the
trustee of the trust holds an institutional trust fund.
(F) "Trustee" means an individual, corporation, institution, or
including, but not limited to, a bank, trust company, or other financial
institution, serving as a trustee or as sole trustee under a
"Trustee" includes an original trustee and any successor or added trustee.
Sec. 1340.32. (A) Subject to division
of this section and section 1340.33
of the Revised Code,
during any fiscal year in which income may be or is required to be distributed
an institution from an institutional trust fund, income means the greater of
(1) The income from the assets of the institutional trust fund for
the fiscal year as determined in accordance with the applicable trust
instrument and applicable law without regard to sections 1340.31 TO 1340.37
of the Revised Code;
(2) The amount requested by the institution's governing board for the
fiscal year pursuant to division (B) of this section.
(B) An institution's governing board may request that an amount
be distributed to the institution for the fiscal year, and that amount shall
not exceed the sum of both of the
(1) Five per cent of the Applicable Fund Value for the institutional trust
the fiscal year;
(2) If, in
any prior fiscal year that is after the effective date of this section, the
governing board requested less than five per
cent of the Applicable Fund Value for such prior fiscal year and if the amount
the institution actually received
from the institutional trust fund
pursuant to division (A) of this section was less than five per cent
for such prior fiscal year, the
aggregate difference between five per cent of the Applicable Fund Value with
respect to each such prior fiscal year and the amount the institution actually
received pursuant to division (A) of this section
for such prior fiscal year.
(C) If, under a trust instrument, more than one institution is a
beneficiary of an
institutional trust fund, the trustee shall take such actions that the trustee
determines appropriate or necessary to allow for the distributions of income
as contemplated by division (A) of this section, which actions may
include dividing the institutional
into separate shares according to the interest that each institution has in
total institutional trust fund held under the trust instrument.
(D) This section does not limit the authority or obligation of a
distribute, or the authority of a governing board to request, funds as
permitted or required under the terms of the applicable trust
Sec. 1340.33. (A) Division
of Section 1340.32 of the Revised Code
does not apply if the applicable trust instrument expressly indicates the
settlor's intention that income is to be otherwise than as defined in division
of section 1340.32 of the Revised Code.
(B) A restriction upon the definition
of income in division
of section 1340.32 of theRevisedCode may not be inferred from
a designation of an institutional trust fund as an
a direction or authorization in the applicable trust instrument to
use only "income," "interest," "dividends," or "rents, issues, or profits," or
"to preserve the principal intact," or a direction that contains other words
a similar import;
a direction in a trust instrument that income and principal
are to be determined by reference to certain statutory provisions; or,
of this section, the inclusion of specified provisions in a trust instrument
setting forth the way in which income and principal are to be
(C) The rule of construction set forth in division
of this section applies to trust instruments executed or in effect before, on,
or after the effective date of this section.
Sec. 1340.34. (A)
In administering the powers to request amounts from a trustee of an
institutional trust fund in accordance with divisions (A) and
of section 1340.32 of theRevisedCode,
members of a governing board of an institution shall exercise ordinary
care and prudence under the facts and circumstances prevailing at the time of
the action or decision and shall make requests for amounts under divisions
(A) and (B) of section 1340.32 of the
only as is prudent under this standard. In so doing, the governing board
consider the long- and short-term needs of the institution in carrying out its
educational, religious, charitable, or other eleemosynary purposes; the
institution's present and anticipated financial requirements; the expected
total return on the investments held by the institution and held by the
under the applicable trust instrument; price level trends; and general
(B) In determining the expected total return on the investments
held by a trustee of an institutional trust fund
under the applicable trust instrument, the members of the governing board of
an institution may follow, and are not required to examine independently, the
determination of the trustee regarding the expected total return on the
investments held by the trustee.
(C) A trustee of an institutional trust fund has no duty to
inquire or ascertain
whether the governing board of an institution has satisfied the standards set
forth in divisions
of this section, and the trustee does not have any liability for the failure
governing board to satisfy those standards.
Sec. 1340.35. Nothing in section 2109.67, sections 1340.01 to 1340.13, or
any other section
limits or restricts the definition of income in division
of section 1340.32 of theRevisedCode
or limits or restricts a governing board of an institution from requesting, or
a trustee from making, distributions from an institutional trust fund in
accordance with sections 1340.31 TO 1340.37 of theRevisedCode.
Sec. 1340.36. (A) Nothing in sections 1340.31 to 1340.35 of theRevisedCode
affects the construction or interpretation of sections 1715.51 to 1715.59 of
relating to the Uniform Management of Institutional Funds Act.
Specifically, neither the percentage set forth in division
of section 1340.32 of theRevisedCode
nor the amount actually requested by a governing board pursuant to
section 1340.32 of the Revised Code shall be construed or interpreted to limit or expand what
amount that can be expended by a governing board of an institution under
sections 1715.51 to 1715.59 of theRevisedCode.
(B) If an institutional trust fund is also an institutional fund
as defined in
of section 1715.51 of theRevisedCode
with the result that sections 1715.51 to 1715.59 of theRevisedCode
also are applicable to the institutional trust fund, then sections 1715.51 to
1715.59 of theRevisedCode
apply to the institutional trust fund, and sections 1340.31 TO 1340.37 of theRevisedCode
do not apply to the institutional trust fund.
Sec. 1340.37. Sections 1340.31 TO 1340.37 of theRevisedCode
may be cited as the "Institutional Trust Funds Act."