| 1 | A bill to be entitled |
| 2 | An act relating to corporations not for profit; creating |
| 3 | s. 617.2104, F.S.; providing a short title; providing |
| 4 | definitions; providing requirements for the management of |
| 5 | funds held by an institution exclusively for charitable |
| 6 | purposes; providing standards of conduct in managing and |
| 7 | investing institutional funds; providing requirements for |
| 8 | appropriation for expenditure or accumulation of an |
| 9 | endowment fund by an institution; authorizing an |
| 10 | institution to delegate to an external agent the |
| 11 | management and investment of an institutional fund; |
| 12 | authorizing the release or modification of a restriction |
| 13 | on management, investment, or purpose of an institutional |
| 14 | fund; providing for determination of compliance; providing |
| 15 | for application to existing or newly established |
| 16 | institutional funds; providing relationship to federal |
| 17 | law; providing requirements for uniformity of application |
| 18 | and construction of the act; creating s. 617.2105, F.S.; |
| 19 | authorizing reversion of real property to the Board of |
| 20 | Trustees of the Internal Improvement Trust Fund if a not- |
| 21 | for-profit corporation holding a deed subject to a |
| 22 | reverter clause violates deed restrictions; repealing s. |
| 23 | 1010.10, F.S., relating to the Florida Uniform Management |
| 24 | of Institutional Funds Act; providing effective dates. |
| 25 |
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| 26 | Be It Enacted by the Legislature of the State of Florida: |
| 27 |
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| 28 | Section 1. Section 617.2104, Florida Statutes, is created |
| 29 | to read: |
| 30 | 617.2104 Florida Uniform Prudent Management of |
| 31 | Institutional Funds Act.- |
| 32 | (1) SHORT TITLE.-This section may be cited as the "Florida |
| 33 | Uniform Prudent Management of Institutional Funds Act." |
| 34 | (2) DEFINITIONS.-For purposes of this section: |
| 35 | (a) "Charitable purpose" means the relief of poverty, the |
| 36 | advancement of education or religion, the promotion of health, |
| 37 | the promotion of a governmental purpose, or any other purpose |
| 38 | the achievement of which is beneficial to the community. |
| 39 | (b) "Endowment fund" means an institutional fund or part |
| 40 | thereof that, under the terms of a gift instrument, is not |
| 41 | wholly expendable by the institution on a current basis. The |
| 42 | term does not include assets that an institution designates as |
| 43 | an endowment fund for its own use. |
| 44 | (c) "Gift instrument" means a record or records, including |
| 45 | an institutional solicitation, under which property is granted |
| 46 | to, transferred to, or held by an institution as an |
| 47 | institutional fund. |
| 48 | (d) "Institution" means: |
| 49 | 1. A person organized and operated exclusively for |
| 50 | charitable purposes, other than: |
| 51 | a. An individual; or |
| 52 | b. A trust subject to s. 518.11; |
| 53 |
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| 54 | 2. A government or governmental subdivision, agency, or |
| 55 | instrumentality to the extent that it holds funds exclusively |
| 56 | for a charitable purpose; or |
| 57 | 3. A trust that had both charitable and noncharitable |
| 58 | interests after all noncharitable interests have been terminated |
| 59 | if the trust is not subject to s. 518.11. |
| 60 | (e) "Institutional fund" means a fund held by an |
| 61 | institution exclusively for charitable purposes. The term does |
| 62 | not include: |
| 63 | 1. Program-related assets; |
| 64 | 2. A fund held for an institution by a trustee that is not |
| 65 | an institution; |
| 66 | 3. A fund in which a beneficiary that is not an |
| 67 | institution has an interest, other than an interest that could |
| 68 | arise upon violation or failure of the purposes of the fund; or |
| 69 | 4. A fund managed or administered by the State Board of |
| 70 | Administration pursuant to its constitutional or statutory |
| 71 | authority. |
| 72 | (f) "Person" means an individual, corporation, business |
| 73 | trust, estate, trust, partnership, limited liability company, |
| 74 | association, joint venture, public corporation, government or |
| 75 | governmental subdivision, agency, or instrumentality, or any |
| 76 | other legal or commercial entity. |
| 77 | (g) "Program-related asset" means an asset held by an |
| 78 | institution primarily to accomplish a charitable purpose of the |
| 79 | institution and not primarily for investment. |
| 80 | (h) "Record" means information that is inscribed on a |
| 81 | tangible medium or that is stored in an electronic or other |
| 82 | medium and is retrievable in perceivable form. |
| 83 | (3) STANDARD OF CONDUCT IN MANAGING AND INVESTING |
| 84 | INSTITUTIONAL FUND.- |
| 85 | (a) Subject to the intent of a donor expressed in a gift |
| 86 | instrument, an institution, in managing and investing an |
| 87 | institutional fund, shall consider the charitable purposes of |
| 88 | the institution and the purposes of the institutional fund. |
| 89 | (b) In addition to complying with the duty of loyalty |
| 90 | imposed by law other than this section, each person responsible |
| 91 | for managing and investing an institutional fund shall manage |
| 92 | and invest the fund in good faith and with the care an |
| 93 | ordinarily prudent person in a like position would exercise |
| 94 | under similar circumstances. |
| 95 | (c) In managing and investing an institutional fund, an |
| 96 | institution: |
| 97 | 1. May incur only costs that are appropriate and |
| 98 | reasonable in relation to the assets, the purposes of the |
| 99 | institution, and the skills available to the institution. |
| 100 | 2. Shall make a reasonable effort to verify facts relevant |
| 101 | to the management and investment of the fund. |
| 102 | (d) An institution may pool two or more institutional |
| 103 | funds for purposes of management and investment. |
| 104 | (e) Except as otherwise provided by a gift instrument, the |
| 105 | following rules apply: |
| 106 | 1. In managing and investing an institutional fund, the |
| 107 | following factors, if relevant, must be considered: |
| 108 | a. General economic conditions. |
| 109 | b. The possible effect of inflation or deflation. |
| 110 | c. The expected tax consequences, if any, of investment |
| 111 | decisions or strategies. |
| 112 | d. The role that each investment or course of action plays |
| 113 | within the overall investment portfolio of the fund. |
| 114 | e. The expected total return from income and the |
| 115 | appreciation of investments. |
| 116 | f. Other resources of the institution. |
| 117 | g. The needs of the institution and the fund to make |
| 118 | distributions and to preserve capital. |
| 119 | h. An asset's special relationship or special value, if |
| 120 | any, to the charitable purposes of the institution. |
| 121 | 2. Management and investment decisions about an individual |
| 122 | asset must be made not in isolation but rather in the context of |
| 123 | the institutional fund's portfolio of investments as a whole and |
| 124 | as a part of an overall investment strategy having risk and |
| 125 | return objectives reasonably suited to the fund and to the |
| 126 | institution. |
| 127 | 3. Except as otherwise provided by law other than this |
| 128 | section, an institution may invest in any kind of property or |
| 129 | type of investment consistent with this section. |
| 130 | 4. An institution shall diversify the investments of an |
| 131 | institutional fund unless the institution reasonably and |
| 132 | prudently determines under this section that the purposes of the |
| 133 | fund are better served without diversification. |
| 134 | 5. Within a reasonable time after receiving property, an |
| 135 | institution shall make and carry out decisions concerning the |
| 136 | retention or disposition of the property or to rebalance a |
| 137 | portfolio in order to bring the institutional fund into |
| 138 | compliance with the purposes, terms, and distribution |
| 139 | requirements of the institution as necessary to meet other |
| 140 | circumstances of the institution and the requirements of this |
| 141 | section. |
| 142 | 6. A person that has special skills or expertise, or is |
| 143 | selected in reliance upon the person's representation that the |
| 144 | person has special skills or expertise, has a duty to use those |
| 145 | skills or that expertise in managing and investing institutional |
| 146 | funds. |
| 147 | (4) APPROPRIATION FOR EXPENDITURE OR ACCUMULATION OF |
| 148 | ENDOWMENT FUND; RULES OF CONSTRUCTION.- |
| 149 | (a) Subject to the intent of a donor expressed in the gift |
| 150 | instrument, an institution may appropriate for expenditure or |
| 151 | accumulate so much of an endowment fund as the institution |
| 152 | determines is prudent for the uses, benefits, purposes, and |
| 153 | duration for which the endowment fund is established. Unless |
| 154 | stated otherwise in the gift instrument, the assets in an |
| 155 | endowment fund are donor-restricted assets until appropriated |
| 156 | for expenditure by the institution. In making a determination to |
| 157 | appropriate or accumulate, the institution shall act in good |
| 158 | faith with the care that an ordinarily prudent person in a like |
| 159 | position would exercise under similar circumstances and shall |
| 160 | consider, if relevant, the following factors: |
| 161 | 1. The duration and preservation of the endowment fund. |
| 162 | 2. The purposes of the institution and the endowment fund. |
| 163 | 3. General economic conditions. |
| 164 | 4. The possible effect of inflation or deflation. |
| 165 | 5. The expected total return from income and the |
| 166 | appreciation of investments. |
| 167 | 6. Other resources of the institution. |
| 168 | 7. The investment policy of the institution. |
| 169 | (b) To limit the authority to appropriate for expenditure |
| 170 | or accumulate under paragraph (a), a gift instrument must |
| 171 | specifically state the limitation. |
| 172 | (c) Terms in a gift instrument designating a gift as an |
| 173 | endowment, or a direction or authorization in the gift |
| 174 | instrument to use only "income," "interest," "dividends," or |
| 175 | "rents, issues, or profits," or "to preserve the principal |
| 176 | intact," or words of similar import: |
| 177 | 1. Create an endowment fund of permanent duration unless |
| 178 | other language in the gift instrument limits the duration or |
| 179 | purpose of the fund. |
| 180 | 2. Do not otherwise limit the authority to appropriate for |
| 181 | expenditure or accumulate under paragraph (a). |
| 182 | (5) DELEGATION OF MANAGEMENT AND INVESTMENT FUNCTIONS.- |
| 183 | (a) Subject to any specific limitation set forth in a gift |
| 184 | instrument or in law other than this section, an institution may |
| 185 | delegate to an external agent the management and investment of |
| 186 | an institutional fund to the extent that an institution could |
| 187 | prudently delegate under the circumstances. An institution shall |
| 188 | act in good faith, with the care that an ordinarily prudent |
| 189 | person in a like position would exercise under similar |
| 190 | circumstances, in: |
| 191 | 1. Selecting an agent. |
| 192 | 2. Establishing the scope and terms of the delegation, |
| 193 | consistent with the purposes of the institution and the |
| 194 | institutional fund. |
| 195 | 3. Periodically reviewing the agent's actions in order to |
| 196 | monitor the agent's performance and compliance with the scope |
| 197 | and terms of the delegation. |
| 198 | (b) In performing a delegated function, an agent owes a |
| 199 | duty to the institution to exercise reasonable care to comply |
| 200 | with the scope and terms of the delegation. |
| 201 | (c) An institution that complies with paragraph (a) is not |
| 202 | liable for the decisions or actions of an agent to which the |
| 203 | function was delegated. |
| 204 | (d) By accepting delegation of a management or investment |
| 205 | function from an institution that is subject to the laws of this |
| 206 | state, an agent submits to the jurisdiction of the courts of |
| 207 | this state in all proceedings arising from or related to the |
| 208 | delegation or the performance of the delegated function. |
| 209 | (e) An institution may delegate management and investment |
| 210 | functions to its committees, officers, or employees as |
| 211 | authorized by law other than this section. |
| 212 | (6) RELEASE OR MODIFICATION OF RESTRICTIONS ON MANAGEMENT, |
| 213 | INVESTMENT, OR PURPOSE.- |
| 214 | (a) If the donor consents in a record, an institution may |
| 215 | release or modify, in whole or in part, a restriction contained |
| 216 | in a gift instrument on the management, investment, or purpose |
| 217 | of an institutional fund. A release or modification may not |
| 218 | allow a fund to be used for a purpose other than a charitable |
| 219 | purpose of the institution. |
| 220 | (b) If consent of the donor in a record cannot be obtained |
| 221 | by reason of the donor's death, disability, unavailability, or |
| 222 | impossibility of identification, a governing board may modify a |
| 223 | restriction contained in a gift instrument regarding the |
| 224 | management, investment, or use of an institutional fund if the |
| 225 | fund has a total value of $100,000 or less and the restriction |
| 226 | has become impracticable or wasteful, impairs the management, |
| 227 | investment, or use of the fund or if, because of circumstances |
| 228 | not anticipated by the donor, a modification of a restriction |
| 229 | will further the purposes of the fund. |
| 230 | (c) If an institution determines that a restriction |
| 231 | contained in a gift instrument on the management, investment, or |
| 232 | purpose of an institutional fund is unlawful, impracticable, |
| 233 | impossible to achieve, or wasteful, the institution, after |
| 234 | providing written notice to the Attorney General, may release or |
| 235 | modify the restriction, in whole or part, if: |
| 236 | 1. The institutional fund subject to the restriction has a |
| 237 | total value of at least $100,000 and not more than $250,000; |
| 238 | 2. More than 20 years have elapsed since the fund was |
| 239 | established; and |
| 240 | 3. The institution uses the property in a manner |
| 241 | consistent with the charitable purposes expressed in the gift |
| 242 | instrument. |
| 243 | (d) The circuit court for the circuit in which an |
| 244 | institution is located, upon application of that institution, |
| 245 | may modify a restriction contained in a gift instrument |
| 246 | regarding the management or investment of an institutional fund |
| 247 | if the restriction has become impracticable or wasteful, if it |
| 248 | impairs the management or investment of the fund, or if, because |
| 249 | of circumstances not anticipated by the donor, a modification of |
| 250 | a restriction will further the purposes of the fund. The |
| 251 | institution shall notify the Attorney General of the |
| 252 | application. To the extent practicable, any modification must be |
| 253 | made in accordance with the donor's probable intention. |
| 254 | (e) If a particular charitable purpose or a restriction |
| 255 | contained in a gift instrument on the use of an institutional |
| 256 | fund becomes unlawful, impracticable, impossible to achieve, or |
| 257 | wasteful, the circuit court for the circuit in which an |
| 258 | institution is located, upon application of that institution, |
| 259 | may modify the purpose of the fund or the restriction on the use |
| 260 | of the fund in a manner consistent with the charitable purposes |
| 261 | expressed in the gift instrument. The institution shall notify |
| 262 | the Attorney General of the application. |
| 263 | (7) REVIEWING COMPLIANCE.-Compliance with this section is |
| 264 | determined in light of the facts and circumstances existing at |
| 265 | the time a decision is made or action is taken, and not by |
| 266 | hindsight. |
| 267 | (8) APPLICATION TO EXISTING INSTITUTIONAL FUNDS.-This |
| 268 | section applies to institutional funds existing on or |
| 269 | established after the effective date of this section. As applied |
| 270 | to institutional funds existing on the effective date of this |
| 271 | section, this section governs only decisions made or actions |
| 272 | taken on or after that date. |
| 273 | (9) RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND |
| 274 | NATIONAL COMMERCE ACT.-This section modifies, limits, and |
| 275 | supersedes the federal Electronic Signatures in Global and |
| 276 | National Commerce Act, 15 U.S.C. ss. 7001 et seq., but does not |
| 277 | modify, limit, or supersede s. 101(c) of that act, 15 U.S.C. s. |
| 278 | 7001(c), or authorize electronic delivery of any of the notices |
| 279 | described in s. 103(b) of that act, 15 U.S.C. s. 7003(b). |
| 280 | (10) UNIFORMITY OF APPLICATION AND CONSTRUCTION.-In |
| 281 | applying and construing this uniform act, consideration must be |
| 282 | given to the need to promote uniformity of the law with respect |
| 283 | to its subject matter among states that enact it. |
| 284 | Section 2. Effective upon this act becoming a law, section |
| 285 | 617.2105, Florida Statutes, is created to read: |
| 286 | 617.2105 Corporation issued a deed to real property.-When |
| 287 | a corporation or foreign corporation subject to this chapter is |
| 288 | issued a deed to real property in the state by the Board of |
| 289 | Trustees of the Internal Improvement Trust Fund containing a |
| 290 | reverter clause that restricts the use of property to specified |
| 291 | uses in the deed, the failure to put the property to the |
| 292 | required use within a period of 3 years after the grant, unless |
| 293 | a stricter time period is contained in the deed, is prima facie |
| 294 | evidence that the restriction is violated, subjecting the |
| 295 | property to reversion to the Board of Trustees of the Internal |
| 296 | Improvement Trust Fund at its discretion. This section may not |
| 297 | be construed to excuse for any period of time a use of the |
| 298 | property in violation of the restrictive use. |
| 299 | Section 3. Section 1010.10, Florida Statutes, is repealed. |
| 300 | Section 4. Except as otherwise expressly provided in this |
| 301 | act and except for this section, which shall take effect upon |
| 302 | this act becoming a law, this act shall take effect July 1, |
| 303 | 2012. |