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S.B. 165
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5 AN ACT RELATING TO COMMERCE AND TRADE; CREATING THE UNIFORM
6 MANAGEMENT OF INSTITUTIONAL FUNDS ACT; REGULATING TRUST FUNDS FOR
7 GIFTS RECEIVED BY CHARITABLE INSTITUTIONS.
8 This act affects sections of Utah Code Annotated 1953 as follows:
9 ENACTS:
10 13-29-1, Utah Code Annotated 1953
11 13-29-2, Utah Code Annotated 1953
12 13-29-3, Utah Code Annotated 1953
13 13-29-4, Utah Code Annotated 1953
14 13-29-5, Utah Code Annotated 1953
15 13-29-6, Utah Code Annotated 1953
16 13-29-7, Utah Code Annotated 1953
17 13-29-8, Utah Code Annotated 1953
18 Be it enacted by the Legislature of the state of Utah:
19 Section 1. Section 13-29-1 is enacted to read:
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21 13-29-1. Title.
22 This chapter shall be known as the "Uniform Management of Institutional Funds Act."
23 Section 2. Section 13-29-2 is enacted to read:
24 13-29-2. Definitions.
25 As used in this chapter:
26 (1) "Endowment fund" means an institutional fund, or any part of it, not wholly
27 expendable by the institution on a current basis under the terms of the applicable gift instrument.
1 (2) "Gift instrument" means a will, deed, grant, conveyance, agreement, memorandum,
2 writing, or other governing document, including the terms of any institutional solicitations from
3 which an institutional fund resulted, under which property is transferred to or held by an institution
4 as an institutional fund.
5 (3) "Governing board" means the body responsible for the management of an institution
6 or of an institutional fund.
7 (4) (a) "Historic dollar value" means the aggregate fair value in dollars of:
8 (i) an endowment fund at the time it became an endowment fund;
9 (ii) each subsequent donation to the fund at the time it is made; and
10 (iii) each accumulation made pursuant to a direction in the applicable gift instrument at
11 the time the accumulation is added to the fund.
12 (b) The determination of historic dollar value made in good faith by the institution is
13 conclusive.
14 (5) "Institution" means an incorporated or unincorporated organization organized and
15 operated exclusively for educational, religious, charitable, or other eleemosynary purposes, or a
16 governmental organization to the extent that it holds funds exclusively for any of these purposes.
17 (6) "Institutional fund" means a fund held by an institution for its exclusive use, benefit,
18 or purposes, but does not include:
19 (a) a fund held for an institution by a trustee that is not an institution; or
20 (b) a fund in which a beneficiary that is not an institution has an interest other than
21 possible rights that could arise upon violation or failure of the purposes of the fund.
22 Section 3. Section 13-29-3 is enacted to read:
23 13-29-3. Appropriation of appreciation.
24 (1) The governing board may appropriate for expenditure for the uses and purposes for
25 which an endowment fund is established as much of the net appreciation, realized and unrealized,
26 in the fair value of the assets of an endowment fund over the historic dollar value of the fund as
27 is prudent under the standard established by Section 13-29-7.
28 (2) Unless affirmatively appropriated by the governing board, the net appreciation, realized
29 and unrealized, in the fair value of the assets of an endowment fund over the historic dollar value
30 of the fund may not be used or available for use for operating expenses. Net appreciation from
31 funds not otherwise donor restricted shall be considered restricted by operation of this chapter.
1 (3) This section does not limit the authority of the governing board to expend funds as
2 permitted under other law, the terms of the applicable gift instrument, or the charter of the
3 institution.
4 Section 4. Section 13-29-4 is enacted to read:
5 13-29-4. Rule of construction.
6 (1) Section 13-29-3 does not apply if the applicable gift instrument indicates the donor's
7 intention that net appreciation may not be expended.
8 (2) A restriction upon the expenditure of net appreciation may not be implied from a
9 designation of a gift as an endowment, or from a direction or authorization in the applicable gift
10 instrument to use only "income," "interest," "dividends," or "rents, issues, or profits," or "to
11 preserve the principal intact," or a direction which contains other words of similar meaning.
12 (3) This rule of construction applies to gift instruments executed or in effect before or after
13 May 5, 1997.
14 (4) Nothing in Section 13-29-3 or this section may be construed to require any institution
15 or governing board to treat net appreciation, realized or unrealized, in the fair value of the assets
16 of an endowment fund over the historic dollar value of the fund as income or revenue from
17 operations for the purpose of ascertaining net financial results from operation or as unrestricted
18 assets. Notwithstanding any Financial Accounting Standards Board statement, rule, or
19 interpretation, the institution or the governing board may exclude that net appreciation or any net
20 depreciation from consideration in determining the results from operations or in classifying
21 unrestricted assets.
22 Section 5. Section 13-29-5 is enacted to read:
23 13-29-5. Investment authority.
24 In addition to an investment otherwise authorized by law or by the applicable gift
25 instrument, and without restriction to investments a fiduciary may make, the governing board,
26 subject to any specific limitations set forth in the applicable gift instrument or in Title 51, Chapter
27 7, State Money Management Act, for governmental organizations or in the applicable law other
28 than law relating to investments by a fiduciary, may:
29 (1) invest and reinvest an institutional fund in any real or personal property considered
30 advisable by the governing board, whether or not it produces a current return, including mortgages,
31 stocks, bonds, debentures, and other securities of profit or nonprofit corporations, shares in or
1 obligations of associations, partnerships, or individuals, and obligations of any state government
2 or political subdivision;
3 (2) retain property contributed by a donor to an institutional fund for as long as the
4 governing board considers advisable;
5 (3) include all or any part of an institutional fund in any pooled or common fund
6 maintained by the institution; and
7 (4) invest all or any part of an institutional fund in any other pooled or common fund
8 available for investment, including shares or interests in regulated investment companies, mutual
9 funds, common trust funds, investment partnerships, real estate investment trusts, or similar
10 organizations in which funds are commingled and investment determinations are made by persons
11 other than the governing board.
12 Section 6. Section 13-29-6 is enacted to read:
13 13-29-6. Delegation of investment management.
14 Except as otherwise provided by the applicable gift instrument or by applicable law relating
15 to governmental institutions or funds, the governing board may:
16 (1) delegate to its committees, officers or employees of the institution or the fund, or
17 agents, including investment counsel, the authority to act in place of the board in investment and
18 reinvestment of institutional funds;
19 (2) contract with independent investment advisors, investment counsel or managers, banks,
20 or trust companies, to invest and reinvest institutional funds; and
21 (3) authorize the payment of compensation for investment advisory or management
22 services.
23 Section 7. Section 13-29-7 is enacted to read:
24 13-29-7. Standard of conduct.
25 In the administration of the powers to appropriate appreciation, to make and retain
26 investments, and to delegate investment management of institutional funds, members of the
27 governing board shall exercise ordinary business care and prudence under the facts and
28 circumstances prevailing at the time of the action or decision. In doing so they shall consider the
29 long and short-term needs of the institution in carrying out its educational, religious, charitable,
30 or other eleemosynary purposes, its present and anticipated financial requirements, expected total
31 return on its investments, price level trends, and general economic conditions.
1 Section 8. Section 13-29-8 is enacted to read:
2 13-29-8. Release of restriction on use or investment.
3 (1) With the written consent of the donor, the governing board may release, in whole or
4 in part, a restriction imposed by the applicable gift instrument on the use or investment of an
5 institutional fund.
6 (2) If written consent of the donor cannot be obtained by reason of his death, disability,
7 unavailability, or impossibility of identification, the governing board may apply in the name of the
8 institution to the district court for release of a restriction imposed by the applicable gift instrument
9 on the use or investment of an institutional fund. The attorney general shall be notified by the
10 governing board of this application and shall be given an opportunity to be heard. If the court
11 finds that the restriction is obsolete, inappropriate, or impracticable, it may by order release the
12 restriction in whole or in part. A release under this section may not change an endowment fund
13 to a fund that is not an endowment fund.
14 (3) A release under this section may not allow a fund to be used for purposes other than
15 the educational, religious, charitable, or other eleemosynary purposes of the institution affected.
16 (4) This section does not limit the application of the doctrine of cy pres.
Legislative Review Note
as of 1-23-97 4:38 PM
A limited legal review of this bill raises no obvious constitutional or statutory concerns.
Office of Legislative Research and General Counsel
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