_________ Bill No. _______

Introduced By _______________________________________________________________________________

A Bill for an Act entitled: "An Act providing for grants for charitable endowments; providing for grant eligibility; providing matching fund requirements; providing for grant procedures; providing appropriations for grants; and providing an effective date."

WHEREAS, community-based endowed philanthropy traditionally originates from private citizens permanently saving capital, which is donated for savings by a charity, the income from which is perpetually committed to charitable purposes; and

WHEREAS, community-based charitable endowments, if nurtured, can grow over time to become significant resources capable of meeting unmet needs of Montana's citizens and their communities; and

WHEREAS, Montana has a relatively weak tradition of community-based endowed philanthropy as demonstrated by comparing our state's ranking of 44th of 50 states in population and 38th in per capita income, with our state's ranking of 49th in foundation assets and 48th in grants received; and

WHEREAS, over the long term, income distributed from community-based endowments can help achieve community goals and objectives in instances in which current funding from state and local government budgets may be limited; and

WHEREAS, community-based endowments in Montana have the long-term potential to benefit all Montana communities by developing creative solutions to help local communities meet growing needs and by helping Montana communities find transitions to self-sufficiency; and

WHEREAS, the more Montana citizens learn about the advantages of endowments and public-private partnerships, the greater are the prospects for expanding privately funded charitable endowments that should ultimately reduce pressures for public funding; and

WHEREAS, the greater emphasis placed on endowed philanthropy by the State of Montana, the greater will be the opportunities and incentives for private contributors to give to endowments designed to benefit Montana's people, their projects, and their organizations; and

WHEREAS, Montana's innovative incentive grant program, known as the Cultural and Aesthetic Trust, during the past 10 years, has successfully generated more than 20 endowments throughout Montana for local arts organizations, whose endowments now total more than $3 million, and this trust can be a model for other incentive grant programs to nurture community-based endowments.


A statement of intent is required for this bill because the bill gives the office of the governor authority to adopt administrative rules. In adopting rules it is the intent of the legislature that the office base the rules on rules adopted by the Montana arts council for administering the cultural and aesthetic grants program.

Be it enacted by the Legislature of the State of Montana:

NEW SECTION. Section 1.  Definitions. As used in [sections 1 through 8], the following definitions apply:

(1) "Endowment" means a permanent and irrevocable fund established by an entity for charitable purposes. The interest and dividend earnings of the fund must be directed to recipients in a manner that qualifies for tax deductibility as a charitable contribution under the Internal Revenue Code, 26 U.S.C.

(2) "Entity" means a nonprofit corporation or organization, such as a 26 U.S.C. 501(c)(3) organization, government entity, civic group, or community, that has established an endowment.

(3) "Irrevocable gift" means a gift that the donor may not legally revoke on the date of valuation. Irrevocable gifts include:

(a) trusts, such as pooled income funds, charitable remainder annuity trusts, and charitable remainder unitrusts to the extent the value of the trust can be determined in accordance with generally acceptable accounting principles;

(b) life insurance, if the benefiting endowment owns the policy, is the beneficiary of the policy, and all premiums have been paid; and

(c) marketable securities and property, when converted to cash and deposited in the endowment.

(4) "Revocable gift" means a gift that the donor may revoke. Revocable gifts include wills, bequests, and life insurance when the donor retains ownership and the endowment is the beneficiary. A revocable gift must indicate that the endowment is the beneficiary, specify the amount and type of bequest, and stipulate that the funds constituting the gift will be placed in the benefiting entity's endowment.

NEW SECTION. Section 2.  Challenge grants. (1) An entity seeking a grant for an endowment shall submit a grant proposal to the committee pursuant to [section 5].

(2)  Grant proposals must be for the purpose of raising matching funds for an endowment.

(3) Challenge grants require a match of at least $3 in cash or irrevocable, planned, or deferred gifts to receive each dollar of grant funds. Challenge grants are available upon meeting the specified match. Not less than one-third of the specified match must be in cash. Not more than one-third of the match may be in revocable gifts. A devise may include retention of an irrevocable life estate by the donor.

(4) To be eligible for the match, a deferred or planned gift must be specifically designated for the benefiting endowment and must be placed in the endowment during the biennium in which a grant is received. Deferred gifts must be valued according to practices and principles established by the federal internal revenue service.

(5) The governor's office may contract for the administration of [sections 1 through 8]. Up to 10% of the total grant funds may be used for administrative purposes.

(6) The match requirement applies to the entire amount of the grant. An entity that receives a grant but that does not meet the match requirement shall return the unmatched portion of the grant to the state.

NEW SECTION. Section 3.  Endowment. (1) The principal of an endowment must be held inviolable by:

(a) a trust as authorized in Title 72, chapters 33 through 36;

(b) a community trust, fund, or foundation established pursuant to 26 U.S.C. 170(c)(2); or

(c) a foundation established pursuant to 26 U.S.C. 501(c)(3) to support a university or college operated under the auspices of the board of regents of higher education.

(2) Grant funds must be distributed semiannually as matching funds pursuant to [section 2(2) and (3)] and placed in an endowment as provided in subsection (1).

NEW SECTION. Section 4. Allocation and disbursement of funds. (1) The office of the governor shall allocate and disburse grant funds appropriated by the legislature.

(2)  The office shall allocate and disburse the available funds in accordance with the rules adopted pursuant to [section 6].

NEW SECTION. Section 5.  Grant selection committee. (1) The governor shall appoint a grant selection committee of not to exceed nine members. The committee shall review all proposals for grants. A member may be a legislator, a member of the task force on endowed philanthropy, a representative of the office of the governor, or a representative of the public.

(2)  The committee shall make recommendations to the office of the governor on each proposal submitted to the committee.

(3)  The committee's recommendations to the office of the governor are advisory only.

NEW SECTION. Section 6.  Rulemaking authority. (1) The office of the governor shall adopt rules that specify the criteria that the advisory committee shall use when evaluating and making recommendations on grant proposals.

(2)  The office of the governor shall adopt rules that implement the provisions of [sections 1 through 8] relating to matching requirements, application procedures, and disbursements of grants.

NEW SECTION. Section 7.  Grant conditions -- reports. (1) A grant may not be awarded unless the entity accepts the conditions of the grant and signs a contract stipulating those conditions.

(2)  An entity shall agree in writing that:

(a)  the entity is the official and sole agency for the administration of the grant; and

(b)  a person may not, on the grounds of race, color, national origin, sex, or age, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity that results from the expenditure of grant funds.

(3)  The entity shall agree that the funds granted will be used solely for the purpose of securing matching funds and administration.

(4)  Grantees shall submit to the office of the governor semiannual reports of administrative expenditures during the course of receipt of grant funds and matching funds.

(5)  The office of the governor may, at the principal place of business of the grantee and during regular business hours, examine any directly pertinent records, accounts, and documents of the grantee involving transactions related to the grant.

NEW SECTION. Section 8.  Reversion of funds. If an entity ceases to exist or no longer meets grant requirements, the amount of the grant reverts to the state.

NEW SECTION. Section 9.  Appropriations. (1) There is appropriated from the general fund to the office of the governor $100,000 for the biennium ending June 30, 1999. The appropriation must be used for grants.

(2) There is appropriated from the general fund to the office of the governor from reversions in excess of the amount estimated by the 55th legislature up to $1 million to be used for grants.

NEW SECTION. Section 10.  Codification instruction. [Sections 1 through 8] are intended to be codified as an integral part of Title 72, chapter 30, and the provisions of Title 72, chapter 30, apply to [sections 1 through 8].

NEW SECTION. Section 11.  Effective date. [This act] is effective July 1, 1997.