Public Act 096-0029
 		





HB0811 Enrolled
LRB096 04081 WGH 14120 b






    AN ACT concerning institutional funds.

 
    Be it enacted by the People of the State of Illinois,
 
represented in the General Assembly:


 
    Section 1. Short title. This Act may be cited as the 
Uniform Prudent Management of Institutional Funds Act.
 
    Section 2. Definitions.   In this Act: 
    (1)  "Charitable purpose" means the relief of poverty, the 
advancement of education or religion, the promotion of health, 
the promotion of a governmental purpose, or any other purpose 
the achievement of which is beneficial to the community.
    (2)  "Endowment fund" means an institutional fund or part 
thereof that, under the terms of a gift instrument, is not 
wholly expendable by the institution on a current basis. The 
term does not include assets that an institution designates as 
an endowment fund for its own use.
    (3)  "Gift instrument" means a record or records, including 
an institutional solicitation, under which property is granted 
to, transferred to, or held by an institution as an 
institutional fund.
    (4)  "Institution" means:
        (A)  a person, other than an individual, organized and 
    operated exclusively for charitable purposes;
        (B)  a government or governmental subdivision, agency, 
    or instrumentality, to the extent that it holds funds 
    exclusively for a charitable purpose; or
        (C)  a trust that had both charitable and noncharitable 
    interests, after all noncharitable interests have 
    terminated.
    (5)  "Institutional fund" means a fund held by an 
institution exclusively for charitable purposes. The term does 
not include:
        (A)  program-related assets;
        (B)  a fund held for an institution by a trustee that is 
    not an institution; or
        (C)  a fund in which a beneficiary that is not an 
    institution has an interest, other than an interest that 
    could arise upon violation or failure of the purposes of 
    the fund.
    (6)  "Person" means an individual, corporation, business 
trust, estate, trust, partnership, limited liability company, 
association, joint venture, public corporation, government or 
governmental subdivision, agency, or instrumentality, or any 
other legal or commercial entity.
    (7)  "Program-related asset" means an asset held by an 
institution primarily to accomplish a charitable purpose of the 
institution and not primarily for investment.
    (8)  "Record" means information that is inscribed on a 
tangible medium or that is stored in an electronic or other 
medium and is retrievable in perceivable form.
 
    Section 3. Standard of conduct in managing and investing 
institutional fund.
    (a)  Subject to the intent of a donor expressed in a gift 
instrument, an institution, in managing and investing an 
institutional fund, shall consider the charitable purposes of 
the institution and the purposes of the institutional fund.
    (b)  In addition to complying with the duty of loyalty 
imposed by law other than this Act, each person responsible for 
managing and investing an institutional fund shall manage and 
invest the fund in good faith and with the care an ordinarily 
prudent person in a like position would exercise under similar 
circumstances.
    (c)  In managing and investing an institutional fund, an 
institution:
        (1)  may incur only costs that are appropriate and 
    reasonable in relation to the assets, the purposes of the 
    institution, and the skills available to the institution; 
    and
    
    (2)  shall make a reasonable effort to verify facts 
    relevant to the management and investment of the fund.
    (d)  An institution may pool two or more institutional funds 
for purposes of management and investment.
    (e)  Except as otherwise provided by a gift instrument, the 
following rules apply:
        (1)  In managing and investing an institutional fund, 
    the following factors, if relevant, must be considered: 
            (A)  general economic conditions;
            (B)  the possible effect of inflation or deflation;
            (C)  the expected tax consequences, if any, of 
        investment decisions or strategies;
            (D)  the role that each investment or course of 
        action plays within the overall investment portfolio 
        of the fund;
            (E)  the expected total return from income and the 
        appreciation of investments;
            (F)  other resources of the institution;
            (G)  the needs of the institution and the fund to 
        make distributions and to preserve capital; and
            (H)  an asset's special relationship or special 
        value, if any, to the charitable purposes of the 
        institution.
        (2)  Management and investment decisions about an 
    individual asset must be made not in isolation but rather 
    in the context of the institutional fund's portfolio of 
    investments as a whole and as a part of an overall 
    investment strategy having risk and return objectives 
    reasonably suited to the fund and to the institution.
        (3)  Except as otherwise provided by law other than this 
    Act, an institution may invest in any kind of property or 
    type of investment consistent with this Section.
        (4)  An institution shall diversify the investments of 
    an institutional fund unless the institution reasonably 
    determines that, because of special circumstances, the 
    purposes of the fund are better served without 
    diversification.
        (5)  Within a reasonable time after receiving property, 
    an institution shall make and carry out decisions 
    concerning the retention or disposition of the property or 
    to rebalance a portfolio, in order to bring the 
    institutional fund into compliance with the purposes, 
    terms, and distribution requirements of the institution as 
    necessary to meet other circumstances of the institution 
    and the requirements of this Act.
        (6)  A person that has special skills or expertise, or 
    is selected in reliance upon the person's representation 
    that the person has special skills or expertise, has a duty 
    to use those skills or that expertise in managing and 
    investing institutional funds.
 
    Section 4. Appropriation for expenditure or accumulation 
of endowment fund; rules of construction.
    (a)  Subject to the intent of a donor expressed in the gift 
instrument, an institution may appropriate for expenditure or 
accumulate so much of an endowment fund as the institution 
determines is prudent for the uses, benefits, purposes, and 
duration for which the endowment fund is established. Unless 
stated otherwise in the gift instrument, the assets in an 
endowment fund are donor-restricted assets until appropriated 
for expenditure by the institution.  In making a determination 
to appropriate or accumulate, the institution shall act in good 
faith, with the care that an ordinarily prudent person in a 
like position would exercise under similar circumstances, and 
shall consider, if relevant, the following factors:
        (1)  the duration and preservation of the endowment 
    fund;
        (2)  the purposes of the institution and the endowment 
    fund;
        (3)  general economic conditions;
        (4)  the possible effect of inflation or deflation;
        (5)  the expected total return from income and the 
    appreciation of investments;
        (6)  other resources of the institution; and
        (7)  the investment policy of the institution.
    (b)  To limit the authority to appropriate for expenditure 
or accumulate under subsection (a), a gift instrument must 
specifically state the limitation.
    (c)  Terms in a gift instrument designating a gift as an 
endowment, or a direction or authorization in the gift 
instrument to use only "income", "interest", "dividends", or 
"rents, issues, or profits", or "to preserve the principal 
intact", or words of similar import:
        (1) create an endowment fund of permanent duration 
    unless other language in the gift instrument limits the 
    duration or purpose of the fund; and
        (2) do not otherwise limit the authority to appropriate 
    for expenditure or accumulate under subsection (a).
 
    Section 5. Delegation of management and investment 
functions.
    (a)  Subject to any specific limitation set forth in a gift 
instrument or in law other than this Act, an institution may 
delegate to an external agent the management and investment of 
an institutional fund to the extent that an institution could 
prudently delegate under the circumstances. An institution 
shall act in good faith, with the care that an ordinarily 
prudent person in a like position would exercise under similar 
circumstances, in:
        (1)  selecting an agent;
        (2)  establishing the scope and terms of the delegation, 
    consistent with the purposes of the institution and the 
    institutional fund; and
        (3)  periodically reviewing the agent's actions in 
    order to monitor the agent's performance and compliance 
    with the scope and terms of the delegation.
    (b)  In performing a delegated function, an agent owes a 
duty to the institution to exercise reasonable care to comply 
with the scope and terms of the delegation.
    (c)  An institution that complies with subsection (a) is not 
liable for the decisions or actions of an agent to which the 
function was delegated.
    (d)  By accepting delegation of a management or investment 
function from an institution that is subject to the laws of 
this State, an agent submits to the jurisdiction of the courts 
of this State in all proceedings arising from or related to the 
delegation or the performance of the delegated function.
    (e)  An institution may delegate management and investment 
functions to its committees, officers, or employees as 
authorized by law of this State other than this Act.
 
    Section 6. Release or modification of restrictions on 
management, investment, or purpose.
    (a)  If the donor consents in a record, an institution may 
release or modify, in whole or in part, a restriction contained 
in a gift instrument on the management, investment, or purpose 
of an institutional fund. A release or modification may not 
allow a fund to be used for a purpose other than a charitable 
purpose of the institution.
    (b)  The court, upon application of an institution, may 
modify a restriction contained in a gift instrument regarding 
the management or investment of an institutional fund if the 
restriction has become impracticable or wasteful, if it impairs 
the management or investment of the fund, or if, because of 
circumstances not anticipated by the donor, a modification of a 
restriction will further the purposes of the fund.  The 
institution shall notify the Attorney General of the 
application, and the Attorney General must be given an 
opportunity to be heard.  To the extent practicable, any 
modification must be made in accordance with the donor's 
probable intention.
    (c)  If a particular charitable purpose or a restriction 
contained in a gift instrument on the use of an institutional 
fund becomes unlawful, impracticable, impossible to achieve, 
or wasteful, the court, upon application of an institution, may 
modify the purpose of the fund or the restriction on the use of 
the fund in a manner consistent with the charitable purposes 
expressed in the gift instrument.  The institution shall notify 
the Attorney General of the application, and the Attorney 
General must be given an opportunity to be heard.
    (d)  If an institution determines that a restriction 
contained in a gift instrument on the management, investment, 
or purpose of an institutional fund is unlawful, impracticable, 
impossible to achieve, or wasteful, the institution, 60 days 
after notification to the Attorney General, may release or 
modify the restriction, in whole or part, if:
        (1)  the institutional fund subject to the restriction 
    has a total value of less than $50,000;
        (2)  more than 20 years have elapsed since the fund was 
    established; and
        (3)  the institution uses the property in a manner 
    consistent with the charitable purposes expressed in the 
    gift instrument.
 
    Section 7. Reviewing compliance. Compliance with this Act 
is determined in light of the facts and circumstances existing 
at the time a decision is made or action is taken, and not by 
hindsight. 
 
    Section 8. Application to existing institutional funds.   
This Act applies to institutional funds existing on or 
established after the effective date of this Act. As applied to 
institutional funds existing on the effective date of this Act, 
this Act governs only decisions made or actions taken on or 
after that date.
 
    Section 9. Relation to Electronic Signatures in Global and 
National Commerce Act.   This Act modifies, limits, and 
supersedes the Electronic Signatures in Global and National 
Commerce Act, 15 U.S.C. Section 7001 et seq., but does not 
modify, limit, or supersede Section 101(c) of that Act, 15 
U.S.C. Section 7001(c), or authorize electronic delivery of any 
of the notices described in Section 103(b) of that Act, 15 
U.S.C. Section 7003(b). 
 
    Section 10. Uniformity of application and construction. In 
applying and construing this uniform Act, consideration must be 
given to the need to promote uniformity of the law with respect 
to its subject matter among states that enact it. 
 

    (760 ILCS 50/Act rep.)


    Section 10.1. Repeal.   The following Act is repealed:
    The Uniform Management of Institutional Funds Act.

 
    Section 10.2. The Religious Corporation Act is amended  by 
changing Sections 41, 43, 46e, 46f, 46g, and 46j as follows:
 



    (805 ILCS 110/41)  (from Ch. 32, par. 170)


    Sec. 41. Upon the incorporation of any congregation, church 
or society, all real
and personal property held by any person 
or trustees for the use of the
members thereof, shall 
immediately vest in such corporation and be subject
to its 
control, and may be used, mortgaged, sold and conveyed the same 
as
if it had been conveyed to such corporation by deed; but no 
such conveyance
or mortgage shall be made so as to affect or 
destroy the intent or effect
of any grant, legacy or donation 
that may be made to such
person or trustee
for the use of such 
congregation, church or society. However, this
limitation on 
the disposition of real or personal property does not apply
to 
the extent that a restriction imposed by a donor on the use of 
an
institutional fund may be released by the governing board of 
an institution
under the "Uniform Prudent Management of 
Institutional Funds Act", approved September
15, 1973.

(Source: P.A. 83-388.)


 



    (805 ILCS 110/43)  (from Ch. 32, par. 172)


    Sec. 43. The trustees shall have the care, custody and 
control of the real and
personal property of the corporation, 
subject to the direction of the
congregation, church or 
society, and may, when directed by the
congregation, church or 
society, erect houses or buildings and
improvements, and repair 
and alter the same, and may, when so directed,
mortgage, 
incumber, sell and convey any real or personal estate of such

corporation, and enter into all lawful contracts in the name of 
and in
behalf of such corporation: but no mortgage, 
incumbrance, sale
or conveyance shall be made of any such 
estate, so as to defeat or destroy
the effect of any gift, 
grant or legacy which
may be made to such
corporation; but all 
such gifts, grants and legacies
shall be
appropriated and used 
as directed or intended by the person or persons
making the 
same. However, this limitation on the disposition of real or

personal property does not apply to the extent that a 
restriction imposed
by a donor on the use of an institutional 
fund may be released by the
governing board of an institution 
under the "Uniform Prudent Management of Institutional Funds 
Act", approved September
15, 1973.

(Source: P.A. 83-388.)


 



    (805 ILCS 110/46e)  (from Ch. 32, par. 180)


    Sec. 46e. The trustees of every such congregation, church, 
or society, under the
patronage, control, direction, or 
supervision of any ecclesiastical body,
or diocesan, or like 
ecclesiastical officer, after the same has become
incorporated 
under Sections 46a to 46h, inclusive, of this Act, and their

successors, shall have perpetual succession with power to adopt 
a common
seal, which may be altered and changed at pleasure, 
contract, and be
contracted with, sue and be sued, plead and be 
impleaded, by the corporate
name of such congregation, in all 
courts, whatever; to receive, hold,
dispose of, mortgage, and 
convey any kind of property; to make and adopt
by-laws for 
their government, not inconsistent with Sections 46a to 46h,

inclusive, of this Act, or with the rules and regulations of 
the sect or
denomination having the charge or patronage of the 
corporation; and shall
alone have power to make all contracts 
needful in the management of the
temporal affairs of such 
congregation, church, or society: but
no conveyance, or 
mortgage shall be made to affect, or destroy the intent
of any 
grant, legacy, or donation, that may be made to any person, or

trustee, for the use of such congregation, church, or society, 
or for the
use of any sect, or denomination. However, this 
limitation on the
disposition of real or personal property does 
not apply to the extent that
a restriction imposed by a donor 
on the use of an institutional fund may be
released by the 
governing board of an institution under the "Uniform Prudent 
Management of Institutional Funds Act", approved September
15, 
1973.
The trustees of any corporation, organized under Sections 
46a to
46h, inclusive, of this Act, which is, or may be, under 
the control,
patronage, direction or, supervision of any 
ecclesiastical body, diocesan,
or like officer, shall hold and 
control, invest or reinvest the real and
personal property of 
such corporation, and contract with reference thereto,

according to the "Uniform Management of Institutional Funds 
Act", or the
rules, regulations, constitution,
articles of 
association, by-laws, or canons of such ecclesiastical body,

diocesan, or like ecclesiastical officer.

(Source: P.A. 83-388.)


 



    (805 ILCS 110/46f)  (from Ch. 32, par. 181)


    Sec. 46f. The trustees of any corporation formed for 
religious purposes under
Sections 46a to 46h, inclusive, of 
this Act, may receive land in the name
of such corporation by 
gift, legacy or purchase, and make,
erect and build
thereon, 
such houses, buildings, or other improvements, as may be 
necessary
for the convenience and comfort of such congregation, 
church, society, or
corporation, and may lay out and maintain 
thereon a burying ground, and may
maintain and build thereon 
schools, orphan asylums, or such other
improvements or 
buildings as may be necessary for the educational and

eleemosynary purposes of such congregation, church, society, 
or
corporation: but such property shall not be used except in 
the
manner expressed in the gift, grant or bequest. However, 
this limitation on
the disposition of real property does not 
apply to the extent that a
restriction imposed by a donor on 
the use of an institutional fund may be
released by the 
governing board of an institution under the "Uniform Prudent 
Management of Institutional Funds Act", approved September
15, 
1973.
If no use or trust is so expressed, no such property 
shall be
used except for the benefit of the corporation, 
church, society, sect, or
denomination for which it was 
intended, or for any religious, educational
or eleemosynary 
purpose approved by such corporation, church, society, or

ecclesiastical body, diocesan, or like ecclesiastical officer.

(Source: P.A. 84-549.)


 



    (805 ILCS 110/46g)  (from Ch. 32, par. 182)


    Sec. 46g. Any ecclesiastical body, or diocesan, or like 
ecclesiastical officer,
may elect, or nominate, or appoint, 
according to the usages, customs,
rules, regulations, articles 
of association, constitution, by-laws or
canons of such 
ecclesiastical body, diocesan or like ecclesiastical
officer, 
or any sect or denomination, 2 or more members of such sect, or

denomination, residing respectively in any ecclesiastical 
districts, or
dioceses, over which such ecclesiastical body, or 
diocesan, or like
ecclesiastical officer shall have 
jurisdiction, as trustees, who may become
incorporated under 
Sections 46a to 46k, inclusive, of this Act, and may
take, 
hold, regulate, control and dispose of any real, personal or 
mixed
property in and outside of this State, devoted to 
eleemosynary,
educational, cemetery or religious purposes (not 
exclusively belonging to,
or used by, any particular 
congregation, church or society which as an
organization, 
incorporated or unincorporated, is in the opinion of its

trustees, wardens, vestrymen or other officers whose powers and 
duties are
similar to trustees financially able to own and 
maintain such property) for
the use of all of the members of 
the sect, or denomination within said
districts, or dioceses, 
or for the use and benefit of such ecclesiastical
body, 
diocesan, or like ecclesiastical officer, or of any parishes,

congregations, societies, churches, missions, benevolent, 
charitable or
educational institutions existing under or 
related to the same, according
to Sections 46a to 46k, 
inclusive, of this Act, according to the "Uniform Prudent 
Management of Institutional Funds Act", approved September
15, 
1973,
or according to the usages, customs, rules, regulations, 
articles
of association, constitution, by-laws or canons of 
such ecclesiastical
body, diocesan, or like ecclesiastical 
officer. The presiding officer or
authorized representative of 
such ecclesiastical body or diocesan, or like
ecclesiastical 
officer, shall, by virtue of his office, be a trustee of any

such corporation and the number, term of office and 
qualifications of said
trustees, their removal and succession 
and their powers, duties and manner
of appointment, shall be 
regulated in the manner provided in Sections 46a
to 46k, 
inclusive, of this Act. An affidavit showing the appointment of

such trustees made and executed by the presiding officer, or 
duly
authorized representative of such ecclesiastical body, or 
diocesan, or like
ecclesiastical officer, or such other person 
as may be designated by said
trustees for such purpose, in 
substantially the same manner and form as
provided in Section 
46b of this Act shall be filed in the office of the
recorder in 
the county in which the principal office or place of
worship of 
such corporation is intended to be situated and also a 
duplicate
copy in the office of the Secretary of State, 
whenever any district or
diocese, under the jurisdiction or 
patronage of such ecclesiastical body,
or diocesan, or like 
ecclesiastical officer, comprises more than any one
county of 
this State or extends outside of the State.

    It shall be the duty of the recorder and the Secretary of 
State to
record such affidavits and said affidavits or copies 
thereof, duly
certified by the recorder and Secretary of State, 
shall be received as
evidence of the due incorporation of the 
organization. No affidavit of
appointment after the first need 
be filed for record.

(Source: P.A. 83-358.)


 



    (805 ILCS 110/46j)  (from Ch. 32, par. 185)


    Sec. 46j. Any church, congregation, society or 
corporation, heretofore or
hereafter formed for religious 
purposes or for the purpose of religious
worship under any of 
the provisions of this Act or under any law of this
State 
incorporating or for the incorporation of religious 
corporations or
societies, may receive land by gift, legacy or 
purchase and make, erect,
and build thereon such houses, 
buildings, or other improvements as may be
necessary for the 
convenience, comfort and welfare of such church,
congregation, 
society or corporation, and may lay out and maintain thereon
a 
cemetery or cemeteries, or a burying ground or grounds and may 
maintain
and build thereon schools, orphan asylums, or such 
other improvements or
buildings as may be necessary for the 
educational, eleemosynary, cemetery
and religious purposes of 
such congregation, church, society or
corporation; but no such 
property shall be used except in the
manner expressed in the 
gift, grant or legacy. However, this
limitation on
the 
disposition of real property does not apply to the extent that 
a
restriction imposed by a donor on the use of an institutional 
fund may be
released by the governing board of an institution 
under the "Uniform Prudent Management of Institutional Funds 
Act", approved September
15, 1973. Or
if no use or trust is so 
expressed, no such property shall be
used except for the 
benefit of the congregation, corporation, church or
society, 
for which it was intended, or for such religious, educational 
or
eleemosynary purpose as may be approved by such 
congregation, church,
society or corporation or the 
ecclesiastical body having jurisdiction or
patronage of or 
charge over such congregation, corporation, church or
society.

    Any corporation, heretofore or hereafter formed for 
religious purposes
under any of the provisions of this Act or 
under any other law of this
State incorporating or for the 
incorporation of religious corporations or
societies, which 
now or hereafter owns, operates, maintains or controls a

cemetery or cemeteries, or a burial ground or grounds, is 
hereby authorized
and empowered to accept by gift, grant, 
contribution, payment, or
legacy, or pursuant to contract, any 
sum of money, funds, securities or
property of any kind, or the 
income or avails thereof, and to hold the same
in trust in 
perpetuity for the care of such cemetery or cemeteries, burial

ground or grounds, or for the care of any lot, grave or crypt 
therein; or
for the special care of any lot, grave or crypt or 
of any family mausoleum
or memorial, marker, or monument in 
such cemetery or cemeteries, burial
ground or grounds. No gift, 
grant, legacy, payment or other
contribution shall be invalid 
by reason of any indefiniteness or
uncertainty as to the 
beneficiary designated in the instrument creating the
gift, 
grant, legacy, payment or other contribution. If any gift,

grant, legacy, payment or other contribution consists of

non-income producing property, such corporation is authorized 
and empowered
to sell such property and to invest the funds 
obtained in accordance with
the provisions of the "Uniform 
Prudent Management of Institutional Funds Act", approved 
September
15, 1973,
or the provisions of the next
succeeding 
paragraph.

    The trust funds authorized by this Section shall be held 
intact and,
unless otherwise restricted by the terms of the 
gift, grant, legacy, contribution,
payment, contract or other 
payment shall be
invested, from time to time reinvested, and 
kept invested by such
corporation in such investments as are 
authorized by the "Uniform Prudent
Management of Institutional 
Funds Act", and according to such standards as
are prescribed, 
for trustees under that Act and the "Trusts and Trustees
Act", 
approved September 10, 1973, as amended, and the net income 
only from
such investments shall be allocated and used for the 
purposes set forth in
the paragraph immediately preceding; but 
the trust
funds authorized by this Section may be commingled 
and may also be
commingled with any other trust funds received 
by such corporation for the
care of the cemetery or cemeteries, 
or burial ground or grounds, or for the
care or special care of 
any lot, grave, crypt, private mausoleum, memorial,
marker, or 
monument whether received by gift, grant, legacy,

contribution, payment, contract or other conveyance heretofore 
or hereafter
made to such corporation.

    The trust funds authorized by this Section, and the income 
therefrom,
shall be exempt from taxation and exempt from the 
operation of the laws
against perpetuities and accumulations.

(Source: P.A. 83-1362.)



 

    Section 11. Effective date. This Act takes effect upon 
becoming law.