Wednesday, February 6, 2008
In the summer of 2006, the Uniform Law Commission approved the Uniform Prudent Management of Institutional Funds Act (UPMIFA). This act replaces (or will, when states enact it) UMIFA, the Rodney Dangerfield of charitable law. (Really, how many of you even know about UMIFA - or new about it before work began on UPMIFA). Although UPMIFA is old news by blogging standards, it seems useful to post some baseline information, so that as the legislative season progresses, we can blog about enactments and nonuniform amendments to the act.
UPMIFA does three things:
- Provides a standard for investing and managing charitable funds. The standard is prudence and the act draws language from the Revised Model Nonprofit Corporation Act (the good faith, ordinarily prudent person standard) and from the Uniform Prudent Investor Act (guidelines as to what constitutes prudent behavior in an investment context).
- Provides a spending rule for endowment funds, if a donor hasn't specified (very specifically) a rule contrary to the rule of prudence in the act.
- Applies the rules of cy pres and equitable deviation to restrictions on funds held by nonprofit corporations, and creates a new rule that permits a charity to apply cy pres to an old (more than 20 years) and small (less than $25,000) fund without going to court (but after notifying the Attorney General).
So far, 14 jurisdications have adopted UPMIFA: Connecticut, Delaware, District of Columbia, Idaho, Indiana, Montana, Nebraska, Nevada, Oklahoma, Oregon, South Dakota, Tennessee, Texas, and Utah.
Twelve states have bills introduced already this session, and more introductions are likely. The twelve are Alabama, Arizona, Colorado, Georgia, Kansas, Michigan, New Hampshire, New Mexico, South Carolina, Vermont, Virginia, and West Virginia.
The Uniform Law Commission's website provides information about the act, including a copy of the act. The ULC updates the list of enactments and introductions weekly.