S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  6681

                            I N  S E N A T E

                            January 26, 2010
                               ___________

Introduced  by  Sen. KRUEGER -- read twice and ordered printed, and when
  printed to be committed to the Committee on Corporations,  Authorities
  and Commissions

AN  ACT  to  amend  the  not-for-profit  corporation law, in relation to
  adopting a prudent management of institutional funds standard; and  to
  amend a chapter of the laws of 2010 amending the not-for-profit corpo-
  ration law and other laws relating to adopting a prudent management of
  institutional funds standard, in relation to the effectiveness thereof

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Section 551 of the not-for-profit corporation law, as added
by a chapter of the laws of 2010 amending the not-for-profit corporation
law and other laws relating to adopting a prudent management of institu-
tional funds standard, as proposed in legislative bills numbers S.4778-A
and A.7907-B, is amended by adding a new  paragraph  (a-1)  to  read  as
follows:
  (A-1)  "DONOR" MEANS THE PERSON WHO GRANTS OR TRANSFERS PROPERTY TO AN
INSTITUTION PURSUANT TO A GIFT INSTRUMENT, OR A PERSON DESIGNATED IN THE
APPLICABLE GIFT INSTRUMENT TO ACT IN THE PLACE OF THE  DONOR,  BUT  DOES
NOT   OTHERWISE  INCLUDE  THE  PERSON'S  EXECUTORS,  HEIRS,  SUCCESSORS,
ASSIGNS, TRANSFEREES, OR DISTRIBUTEES.
  S 2. Paragraphs (d) and (e)  of  section  553  of  the  not-for-profit
corporation  law, as added by a chapter of the laws of 2010 amending the
not-for-profit corporation law and other laws  relating  to  adopting  a
prudent  management  of  institutional  funds  standard,  as proposed in
legislative bills numbers S.4778-A and A.7907-B,  are  relettered  para-
graphs (e) and (f) and a new paragraph (d) is added to read as follows:
  (D)  UNLESS STATED OTHERWISE IN THE GIFT INSTRUMENT, THE APPROPRIATION
FOR EXPENDITURE IN ANY YEAR OF AN AMOUNT GREATER THAN SEVEN  PERCENT  OF
THE  FAIR  MARKET VALUE OF AN ENDOWMENT FUND, CALCULATED ON THE BASIS OF
MARKET VALUES DETERMINED AT LEAST QUARTERLY AND AVERAGED OVER  A  PERIOD
OF NOT LESS THAN THREE YEARS IMMEDIATELY PRECEDING THE YEAR IN WHICH THE
APPROPRIATION  FOR EXPENDITURE IS MADE, CREATES A REBUTTABLE PRESUMPTION
OF IMPRUDENCE. FOR AN ENDOWMENT FUND IN EXISTENCE FOR FEWER  THAN  THREE

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
              

                                                           LBD15065-04-0

S. 6681                             2

YEARS,  THE  FAIR  MARKET VALUE OF THE ENDOWMENT FUND MUST BE CALCULATED
FOR THE PERIOD THE ENDOWMENT FUND HAS BEEN IN EXISTENCE. THIS  PARAGRAPH
DOES NOT:
  (1)  APPLY  TO  AN  APPROPRIATION  FOR EXPENDITURE PERMITTED UNDER LAW
OTHER THAN THIS ACT OR BY THE GIFT INSTRUMENT; OR
  (2) CREATE A PRESUMPTION OF PRUDENCE FOR AN APPROPRIATION FOR EXPENDI-
TURE OF AN AMOUNT LESS THAN OR EQUAL TO SEVEN PERCENT OF THE FAIR MARKET
VALUE OF THE ENDOWMENT FUND.
  S 3. Paragraph (e) of section 553 of  the  not-for-profit  corporation
law, as added by a chapter of the laws of 2010 amending the not-for-pro-
fit  corporation  law  and  other  laws  relating  to adopting a prudent
management of institutional funds standard, as proposed  in  legislative
bills  numbers S.4778-A and A.7907-B and as relettered by section two of
this act, is amended to read as follows:
  (e) (1) With respect to a gift  instrument  [dated]  EXECUTED  BY  THE
DONOR  before  the  effective  date of this article, an institution must
provide ninety days notice to the donor, if the donor is then available,
before applying paragraph (a) of this section for the first time, during
which time the donor may, with the consent of the  institution,  clarify
or  amend  the  gift instrument to prohibit the application of paragraph
(a) of this section.  Such notice shall include a form for  use  by  the
donor, which shall contain language substantially as follows:
Attention, Donor:
Please check Box #1 or #2 below and return to the address shown above.
( ) #1 The institution may spend [all or part] AS MUCH of my gift[.
       The]  AS  MAY  BE  PRUDENT  UNDER  CRITERIA  ESTABLISHED  BY  THE
       provisions of Article 5-A of the Not-for-Profit Corporation  Law,
       the  Prudent Management of Institutional Funds Act [regarding the
       spending of endowment funds shall apply to this gift].
( ) #2 [The institution may not spend below the original dollar value of
       my gift.
       The] NOTWITHSTANDING THE provisions of Article 5-A  of  the  Not-
       for-Profit  Corporation  Law,  the Prudent Management of Institu-
       tional Funds Act [regarding the spending of endowment funds shall
       not apply to this gift], THE INSTITUTION MAY NOT SPEND BELOW  THE
       ORIGINAL  DOLLAR VALUE OF MY GIFT. HOWEVER THE PRUDENCE STANDARDS
       FOR SPENDING CONTAINED  IN  ARTICLE  5-A  OF  THE  NOT-FOR-PROFIT
       CORPORATION LAW SHALL APPLY.
  If  the donor does not respond within ninety days from the date notice
was given, [paragraph] PARAGRAPHS (a), (B),  AND  (C)  of  this  section
[may] SHALL be applied.  THE ACT OF SENDING THE FORM AS REQUIRED BY THIS
SECTION SHALL NOT BE DEEMED CONSENT BY THE INSTITUTION.
  (2)  [For  purposes  of  this  paragraph, "donor" means the person who
grants or transfers property  to  an  institution  pursuant  to  a  gift
instrument,  or a person designated in the applicable gift instrument to
act in the place of the  donor,  but  does  not  otherwise  include  the
person's  executors, heirs, successors, assigns, transferees, or distri-
butees.
  (3)] This paragraph shall  not  apply:  (A)  if  the  gift  instrument
permits  appropriation  for  expenditure from the endowment fund without
regard for the fund's historic dollar value; or (B) to funds received as
a result of an institutional solicitation without  a  separate  communi-
cation by the donor expressing a restriction on the use of funds.
  S  4.  Paragraph  (a) of section 555 of the not-for-profit corporation
law, as added by a chapter of the laws of 2010 amending the not-for-pro-
fit corporation law and  other  laws  relating  to  adopting  a  prudent

S. 6681                             3

management  of  institutional funds standard, as proposed in legislative
bills numbers S.4778-A and A.7907-B, is amended to read as follows:
  (a)  If  the donor consents in a record, an institution may release or
modify, in whole or in part, a restriction contained in a  gift  instru-
ment on the management, investment, or purpose of an institutional fund.
A  release or modification may not allow a fund to be used for a purpose
other than a [programmatic] CHARITABLE purpose of the institution.
  S 5. Section 16 of a chapter of the laws of 2010 amending the not-for-
profit corporation law and other laws relating  to  adopting  a  prudent
management  of  institutional funds standard, as proposed in legislative
bills numbers S.4778-A and A.7907-B, is amended to read as follows:
  S 16. This act shall take effect  [on  the  first  of  September  next
succeeding the date on which it shall have become a law] IMMEDIATELY.
  S 6. This act shall take effect on the same day and in the same manner
as a chapter of the laws of 2010 amending the not-for-profit corporation
law and other laws relating to adopting a prudent management of institu-
tional  funds standard as proposed in legislative bills numbers S.4778-A
and A.7907-B, takes effect; provided, however,  that  paragraph  (d)  of
section  553  of  the not-for-profit corporation law as added by section
two of this act shall apply only to gift instruments made  on  or  after
January first next succeeding the effective date of this act.