Senate Bill No. 1260

Public Act No. 99-52

An Act Concerning Charitable Gift Annuities.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) As used in sections 1 to 5, inclusive, of this act:

(1) "Charitable gift annuity" means a transfer of cash or other property by a donor to a charitable organization in return for an annuity payable over one or two lives, under which the actuarial value of the annuity is less than the value of the cash or other property transferred and the difference in value constitutes a charitable deduction for federal tax purposes.

(2) "Charitable organization" means an entity described in: (A) Section 501(c)(3) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended (26 USC Section 501(c)(3)); or (B) Section 170(c) of said Internal Revenue Code (26 USC Section 170(c)).

(3) "Qualified charitable gift annuity" means a charitable gift annuity described in Section 501(m)(5) of said Internal Revenue Code (26 USC Section 501(m)(5)), and Section 514(c)(5) of said Internal Revenue Code (26 USC Section 514(c)(5)), that is issued by a charitable organization that on the date of the annuity agreement: (A) Has a minimum of three hundred thousand dollars in unrestricted cash, cash equivalents or publicly traded securities, exclusive of the assets funding the annuity agreement; and (B) has been in continuous operation for at least three years or is a successor or affiliate of a charitable organization that has been in continuous operation for at least three years.

Sec. 2. (NEW) (a) The issuance of a qualified charitable gift annuity shall not constitute engaging in the business of insurance in this state.

(b) A charitable gift annuity issued before October 1, 1999, is a qualified charitable gift annuity for the purposes of sections 1 to 5, inclusive, of this act, and the issuance of that charitable gift annuity shall not constitute engaging in the business of insurance in this state.

Sec. 3. (NEW) (a) When entering into an agreement for a qualified charitable gift annuity, the charitable organization shall disclose to the donor in writing in the annuity agreement that a qualified charitable gift annuity is not insurance under the laws of this state and is not subject to regulation by the Insurance Commissioner or protected by an insurance guaranty association.

(b) The notice provisions required by this section shall be in a separate paragraph in a print size no smaller than that employed in the annuity agreement generally.

Sec. 4. (NEW) (a) A charitable organization that issues qualified charitable gift annuities shall notify the Insurance Commissioner, in writing, by the latter of January 1, 2000, or the date on which it enters into the organization's first qualified charitable gift annuity agreement. The notice shall: (1) Be signed by an officer or director of the organization; (2) identify the organization; and (3) certify that: (A) The organization is a charitable organization; and (B) the annuities issued by the organization are qualified charitable gift annuities.

(b) The organization shall not be required to submit additional information except to determine appropriate penalties that may be applicable under section 5 of this act.

Sec. 5. (NEW) The failure of a charitable organization to comply with the notice requirements imposed under section 3 or 4 of this act shall not prevent a charitable gift annuity that otherwise meets the requirements of this act from constituting a qualified charitable gift annuity. The Insurance Commissioner may enforce performance of the requirements of sections 3 and 4 of this act by sending a letter by certified mail, return receipt requested, demanding that the charitable organization comply with the requirements of sections 3 and 4 of this act. The commissioner may fine the charitable organization in an amount not to exceed one thousand dollars per qualified charitable gift annuity agreement issued until such time as the charitable organization complies with the requirements of sections 3 and 4 of this act.

Approved May 27, 1999

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