CONTENTS H.R. 9172 (Smith of New York), a bill to facilitate the amendment of the governing instruments of certain charitable trusts and corporations____ H.R. 10790 (Morse), similar bill_ Staff memorandum.. STATEMENTS D.C. Bankers Association, Francis J. Lyons, chairman, Fiduciaries Section_ MATERIAL SUBMITTED FOR THE RECORD Bar Association of the District of Columbia: William S. Corey, chairman, Taxation Committee, letter dated May Government of the District of Columbia, Graham W. Watt, Assistant to the Commissioner, letter to Chairman McMillan, dated October 5, 1971, Letter to Chairman McMillan, dated October 6, 1971... Letter to Chairman Stuckey, dated October 12, 1971.. McMillan, Hon. John L., chairman, District Committee, letter to Hon. John B. Connally, Jr., Secretary of the Treasury, re H.R. 9172, dated Chapoton, John E., Legislative Counsel, letter to Chairman McMillan, Hamblen, Linden, Director, Miscellaneous and Special Provisions Letter dated April 22, 1971, to William S. Corey, District of Co- Treasury Department, Internal Revenue Service, opinion on the effect of Public Law 92-177 provisions meeting the requirements of the Internal CHARITABLE TRUSTS WEDNESDAY, OCTOBER 6, 1971 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON PUBLIC HEALTH AND WELFARE OF THE COMMITTEE ON THE DISTRICT OF COLUMBIA, Washington, D.C. The subcommittee met, pursuant to notice, in Room 1310, Longworth House Office Building, at 10:20 a.m., Hon. W. S. Stuckey (Chairman of the Subcommittee) presiding. Present: Representatives Stuckey (Chairman of the Subcommittee), Cabell, Broyhill, Gude and McKinney. Also Present: James T. Clark, Clerk; Hayden S. Garber, Counsel; Patrick E. Kelly, Assistant Counsel; John Hogan, Minority Clerk; and Leonard O. Hilder, Legislative Assistant. Mr. STUCKEY. The Subcommittee will come to order. We will be in session to hear today H.R. 9172 and H.R. 10790, which are similar bills, to facilitate the amendment of the governing instruments of certain charitable trusts and corporations subject to the jurisdiction of the District of Columbia, in order to conform to the requirements of section 508 and section 664 of the Internal Revenue Code of 1954, as added by the Tax Reform Act of 1969. The bills, H.R. 9172 and H.R. 10790, together with memoranda thereon, follow: [H.R. 9172, 92d Cong., first sess., by Mr. Smith of New York on June 15, 1971] A BILL To facilitate the amendment of the governing instruments of certain charitable trusts and corpora tions subject to the jurisdiction of the District of Columbia, in order to conform to the requirements of section 508 of the Internal Revenue Code of 1954, as added by the Tax Reform Act of 1969. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That title 21 of the District of Columbia Code is amended by adding the following chapter: "Sec. "CHAPTER 18.-CHARITABLE AND SPLIT-INTEREST TRUSTS "21-1801. Charitable and split-interest trusts. "21-1801. CHARITABLE AND SPLIT-INTEREST TRUSTS "(a) Notwithstanding any provision to the contrary in the governing instrument or under any law applicable to the District of Columbia (except as provided in subsection (d) of this section), the governing instrument of any trust which is treated during a particular year as a private foundation described in section 509 of the Internal Revenue Code of 1954 (including any nonexempt charitable trust described in section 4947(a)(1) of the Code which is treated as a private foundation) and the governing instrument of any nonexempt split-interest trust described in section 4947 (a) (2) of the Code (but only to the extent that section 508(e) of the Code is applicable to such nonexempt split-interest trust) shall be deemed during such particular year to contain all of the following provisions: "(1) The trust shall not engage in any act of self-dealing which is taxable under section 4941 of the Code. "(2) The trust shall make distribution at such time and in such manner as not to subject it to tax under section 4942 of the Code. "(3) The trust shall not retain any excess business holdings which would subject it to tax under section 4943 of the Code. "(4) The trust shall not make any investments which would subject it to tax under section 4944 of the Code. "(5) The trust shall not make any taxable expenditures which would subject it to tax under section 4945 of the Code. With respect to any such trust created prior to January 1, 1970, subsection (a) shall apply only for its taxable years beginning on or after January 1, 1972. "(b) Notwithstanding any provision to the contrary in the governing instrument, the trustee or trustees of any trust described in subsection (a), other than a trust described in section 4947 (a) (2) of the Code, may, without application to any court, amend the governing instrument expressly to include the provisions required by section 508(e) of the Code by executing a written amendment to the trust and delivering a copy thereof, by certified mail, to each named beneficiary, if any. "(c) Notwithstanding any provision to the contrary in the governing instrument, the trustee or trustees of any trust described in section 4947(a)(2) of the Code to which subsection (a) is applicable may, without application to any court, amend the governing instrument expressly to include the provisions required by section 508 (e) of the Code by executing a written amendment to the trust and delivering a copy thereof, by certified mail, to each named beneficiary, if any: Provided, however, That the trustee or trustees shall first obtain the written consent of the creator or creators of such trust if then living and competent to give such consent. "(d) The provisions of subsection (a) shall not apply to any trust to the extent that a court of competent jurisdiction shall determine that such application would be contrary to the terms of the governing instrument and that the same may not properly be amended to conform with subsection (a). "(e) For purposes of this section, the term 'trust' includes (i) any trust created by will of a resident of the District of Columbia admitted to probate in the District of Columbia, (ii) any trust created by a resident of the District of Columbia and executed in the District of Columbia, (iii) any trust of which the trustee or a cotrustee is a bank or trust company doing business in the District of Columbia, (iv) any trust of which a majority of the trustees are resident in the District of Columbia, (v) any trust of real property located in the District of Columbia, or (vi) any trust the governing instrument of which provides that it is governed by the laws of the District of Columbia. "(f) All references in this section to the 'Internal Revenue Code of 1954' or to the 'Code' are to the Internal Revenue Code of 1954 and corresponding provisions of any subsequent Federal tax laws. "(g) In the case of a private foundation other than a trust, see section.” SEC. 2 (a) Notwithstanding any provision to the contrary in the governing instrument or under any law applicable to the District of Columbia (except as provided in subsection (c) of this section), the governing instrument of any corporation organized under the laws of the District of Columbia or any Act of Congress applicable to the District of Columbia which is treated during a particular year as a private foundation described in section 509 of the Code shall be deemed during such particular year to contain the following provisions: (1) The corporation shall not engage in any act of self-dealing which is taxable under section 4941 of the Code. (2) The corporation shall make distributions at such time and in such manner as not to subject it to tax under section 4942 of the Code. (3) The corporation shall not retain any excess business holdings which would subject it to tax under section 4943 of the Code. (4) The corporation shall not make any investments which would subject it to tax under section 4944 of the Code. (5) The corporation shall not make any taxable expenditures which would subject it to tax under section 4945 of the Code. With respect to any such corporation organized prior to January 1, 1970, subsection (a) shall apply only for its taxable years beginning on or after January 1, 1972. (b) The governing instrument of any corporation described in subsection (a) may be amended, in the manner provided by law for amendment of such governing instrument, expressly to include the provisions required by section 508 (e) of the Code. (e) The provisions of subsection (a) shall not apply to any corporation to the extent that its governing instrument is amended, in the manner provided by law for amendment of such governing instrument, expressly to exclude the application of subsection (a). (d) For purposes of this section, the term "corporation" includes an association (other than an association treated as a trust described in section 21-1801). (e) All references in this section to the "Internal Revenue Code of 1954" or to the "Code" are to the Internal Revenue Code of 1954 and corresponding provisions of any subsequent Federal tax laws. (f) In the case of a private foundation other than a corporation, see section 21-1801. SEC. 3. Except as otherwise provided herein, the provisions of this Act shall take effect commencing with taxable years of trusts and corporations beginning on or after January 1, 1970. [H.R. 10790, 92d Cong., first sess., by Mr. Morse on September 21, 1971] A BILL to facilitate the amendment of the governing instruments of certain charitable trusts and corporations subject to the jurisdiction of the District of Columbia, in order to conform to the requirements of section 508 of the Internal Revenue Code of 1954, as added by the Tax Reform Act of 1969 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That title 21 of the District of Columbia Code is amended by adding the following new chapter: "CHAPTER 18.-CHARITABLE AND SPLIT-INTEREST TRUSTS "Sec. 21-1801. Charitable and split-interest trusts. "21-1801. CHARITABLE AND SPLIT-INTEREST TRUSTS "(a) Notwithstanding any provision to the contrary in the governing instrument or under any law applicable to the District of Columbia (except as provided in subsection (d) of this section), the governing instrument of any trust which is treated during a particular year as a private foundation described in section 509 of the Internal Revenue Code of 1954 (including any nonexempt charitable trust described in section 4947(a)(1) of such Code which is treated as a private foundation) and the governing instrument of any nonexempt split-interest trust described in section 4947 (a)(2) of such Code (but only to the extent that section 508 (e) of such Code is applicable to such nonexempt split-interest trust) shall be deemed during such particular year to contain all of the following provisions: "(1) The trust shall not engage in any act of self-dealing which is taxable under section 4941 of such Code. "(2) The trust shall make distributions at such time and in such manner as not to subject it to tax under section 4942 of such Code. "(3) The trust shall not retain any excess business holdings which would subject it to tax under section 4943 of such Čode. "(4) The trust shall not make any investments which would subject it to tax under section 4944 of such Code. "(5) The trust shall not make any taxable expenditures which would subject it to tax under section 4945 of such Code. With respect to any such trust created prior to January 1, 1970, subsection (a) shall apply only for its taxable years beginning on or after January 1, 1972. "(b) Notwithstanding any provision to the contrary in the governing instrument, the trustee or trustees of any trust described in subsection (a), other than a trust described in section 4947(a) (2) of such Code, may, without application to any court, amend the governing instrument expressly to include the provisions required by section 508(e) of such Code by executing a written amendment to the trust and delivering a copy thereof, by certified mail, to each named beneficiary, if any. "(c) Notwithstanding any provision to the contrary in the governing instrument, the trustee or trustees of any trust described in section 4947(a)(2) of such Code to which subsection (a) is applicable may, after obtaining the written consent of the creator of such trust if then living and competent to give such consent, and without application to any court, amend the governing instrument expressly to include the provisions required by section 508(e) of such Code by executing a written amendment to the trust and delivering a copy thereof by certified mail, to each named beneficiary, if any. |