ABATax Report and Recommendation to ABA House of Delegates, June 2001

Section of Taxation
Report and Recommendation

RecommendationReportExecutive Summary

American Bar Association
Section of Taxation
Report to the ABA House of Delegates

GENERAL INFORMATION FORM

To Be Appended to Reports with Recommendations
(Please refer to instructions for completing this form.)

Submitting Entity: Section of Taxation
Submitted By: Richard M. Lipton

  1. Summary of Recommendation(s).
  2. To amend Section 642(c)(5) of the Internal Revenue Code of 1986 to permit pooled income funds to be invested more prudently for total return and to permit the creation of a unitrust interest in assets transferred to pooled income funds.

  3. Approval by Submitting Entity.
  4. This is submitted contingent on Section approval at the Annual Meeting on August 4, 2001.

  5. Has this or a similar recommendation been submitted to the House or Board previously?
  6. No

  7. What existing Association policies are relevant to this recommendation and how would they be affected by its adoption?
  8. None

  9. What urgency exists which requires action at this meeting of the House?
  10. The pooled income fund is an important fundraising vehicle for donors who wish to make a charitable gift while retaining or creating a life income interest but who do not possess sufficient financial resources to establish a charitable remainder trust. Currently Section 642(c)(5)mandates that the payout to income beneficiaries consists of current interest and dividend income earned by the pooled income fund’s assets, rather than being based on the total value of the fund’s assets. This structure stunts the growth of assets in pooled income funds, and hinders the ability of smaller donors and charities to realize the kinds of investment returns possible from charitable remainder trusts. The inability of pooled income funds to offer donors the equivalent of a unitrust interest has resulted in these funds losing their attractiveness to potential donors.

  11. Status of Legislation. (If applicable.)
  12. None

  13. Cost to the Association. (Both direct and indirect costs.)
  14. None

  15. Disclosure of Interest. (If applicable.)
  16. No member of the originating Committee or of the Council of the Section of Taxation is known to have a material interest in the Resolution by virtue of a specific employment or engagement to obtain the result of the Resolution.

  17. Referrals.
  18. All Sections and Divisions.

  19. Contact Person. (Prior to the meeting.)
     
  20. James P. Holden
    Steptoe & Johnson, LLP
    1330 Connecticut Avenue, NW
    Washington, DC 20036
    202/429-6407

    Stefan F. Tucker
    Venable
    1201 New York Avenue, NW
    Penthouse
    Washington, DC 20005
    202/216-8570

    Carolyn M. Osteen
    Ropes & Gray
    One International Pl
    Boston, MA 02110-2602
    617/951-7252

    Christine A. Brunswick
    American Bar Association
    10 th Floor
    740 15 th Street, NW
    Washington, DC 20005
    202/662-8675

  21. Contact Person. (Who will present the report to the House.)

    James P. Holden
    Steptoe & Johnson, LLP
    1330 Connecticut Avenue, NW
    Washington, DC 20036
    202/429-6407

    Stefan F. Tucker
    Venable
    1201 New York Avenue, NW
    Penthouse
    Washington, DC 20005
    202/216-8570

RecommendationReportExecutive Summary

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