moor will probably no longer-to the regret of the State of Colorado and to the Colorado Springs community-be locally controlled or operated.

Today, Senator Hart and I are jointly introducing legislation which will stop this forced divestiture which is now required by an overly broad and misguided provision contained in a 1969 tax law. When Congress wrote the 1969 law, some individuals created foundations to escape payment of estate taxes on inherited famiy enterprises. To stop this practice, Congress enacted legislation requiring all foundations-even if there was no hint of tax fraud or abuse-to divest themselves of majority ownership of all enterprises. As a result, the El Polmar Foundation must divest itself of 50 percent of its Broadmoor stock by 1989, and an additional 15 percent of its stock by 2004.

One irony surrounding the El Pomar's forced divestiture is that in drafting the 1969 law the U.S. Senate approved a provision which in large measure exempted the Broadmoor from the divestiture requirement for at least 36 years. At the time, the Senate believed, as I do today, that the factors that led to the foundation legislation in 1969 are not present in the El Pomar Foundation. In fact, none of those operating the Broadmoor or the Foundation are descendents of Spencer Penrose, the original founder of the Broadmoor and the Foundation.

The legislation Senator Hart and I are introducing today exempts the El Pomar Foundation from the divestiture requirements imposed by Section 101(1) of the Tax Reform Act of 1969.

There are several compelling reasons why S. 1464 should be enacted:

One, profits now earned from the Broadmoor Hotel's operations are channeled through the El Pomar Foundation in to civic and charitable projects throughout Colorado. A forced divestiture would adversely affect this partnership.

Two, under present law prospective buyers could take unfair advantage of the Foundation since it has a legal mandate to sell in the future.

Three, the factors that led to the 1969 law are not present in this case. Both the Broadmoor Hotel and the Foundation are totally free from the influence of the grantor or the heirs.

Four, there would be no revenue loss if this proposal is enacted into law since the Boradmoor Hotel is subject to the corporate income tax law regardless of ownership by the El Pomar Foundation. Although the El Pomar Foundation is exempt from Federal Income Tax law, the Foundation, like all foundations, is subject to the private foundation excise tax on its investment income.

Five, there is precedent for this legislation since the U.S. Senate has earlier approved similar legislation.

Six, the Broadmoor Hotel is locally owned and managed, and is a bedrock of the Colorado Springs community. It is the city's second largest employer, and the Broadmoor subsidizes hundreds of community activities. Because the Broadmoor is such a unique and valuable asset, financial analysts believe that only corporations now located outside the State would be able to purchase the Broadmoor. So the likely result of a forced sale of the Broadmoor, as now required by law, would be nonresident absentee ownership. One indi

cation of the opposition to absentee ownership of the Broadmoor is an editorial accompanying my remarks that was recently published by the Colorado Springs Gazette Telegraph, the city's largest news

paper.

Mr. President, the Armstrong-Hart bill merits quick hearings and early enactment. Let me point out that this is not a controversial bill. In fact, it has unanimously passed the Senate Finance Committee on a 19-0 roll call vote. It has also twice passed the United States Senate . . . again by unanimous votes. The only thing preventing the quick enactment of this legislation is the House of Representatives. They have rejected the amendment in conference with the Senate. But I trust this attitude will change now that the House Ways and Means Committee is scheduling hearings on the issue. I look forward to working with the House on this issue.

AFTERNOON SESSION

Senator ARMSTRONG. The committee will come to order. This afternoon we are meeting to hold hearings on two bills, S. 1464 and S. 1549. S. 1464-exemption for divestiture requirements of excess business holding provisions for the El Pomar Foundation.

Senator ARMSTRONG. Our first panel is Mr. William Hybl of the El Pomar Foundation, and Mr. William Morris, representing the Altman Foundation. Gentlemen, would you come up to the microphone and take your places? As you are well aware, the committee has dealt with S. 1464 in substance before. And so it is my thought that a lengthy hearing is not necessary, but in order to just update the record on this, we thought it would be worthwhile to get some current testimony and perhaps to ask a question or two in response to some issues that were raised this morning. Mr. Hybl, we are very glad to have you with us, and we would like to have you proceed however you would like to.

STATEMENT OF WILLIAM J. HYBL, PRESIDENT, EL POMAR FOUNDATION, COLORADO SPRINGS, COLO.

Mr. HYBL. Thank you, Mr. Chairman. I am Bill Hybl, president of the El Pomar Foundation. I would ask that my written statement be included in the record, and I be given time to summarize some of the areas covered in asking for support of S. 1464.

The El Pomar Foundation was started in 1937 by Spencer Penrose, who was owner of the Broadmoor Hotel. A 100-percent ownership of the Broadmoor has always been with Mr. Penrose and now with the El Pomar Foundation. After the Tax Reform Act of 1969, several items occurred of interest. The El Pomar Foundation has divested 11 other separate companies over the last 15 years. Good business judgment and criteria which the trustees used in their fidiciary duties were the basis for El Pomar Foundation retaining the Broadmoor Hotel. I would like to go into three areas before I address the specifics of section 4943 of the Internal Revenue Code. First, the Broadmoor Hotel has been an appreciating_asset which, through the years, increased the ability of the El Pomar Foundation to make charitable distributions throughout the State of Colorado. Second, Broadmoor Hotel represents less than 20 percent of the assets of the El Pomar Foundation. The hotel certainly

has been a significant contributor with its appreciating value and its current dividend income to the foundation. The third reason is that the Broadmoor is a part of the local history and focus of the Pikes Peak region in Colorado, just as many other foundations who have presented their cases are part of their regional history. The foundation would regret being in a position where the Broadmoor Hotel was sold to an offshore interest, multinational corporation or a large hotel chain. The fact is the hotel is a profitable entity, a holding which has been very good for the El Pomar Foundation as an investment. The foundation has not been directly involved in day-to-day management of the hotel. In fact, there is a group of good managers that run the hotel, while the foundation is operated separately.

The El Pomar Foundation started with just $18 million in assets, but since 1937 has made grants of $75 million, and still has a corpus of something in excess of $110 million being used for charitable good in the State of Colorado. Grants have included public charities that are traditional, nontraditional, and new institutions with innovative ideas throughout the State. There are no lineal heirs of the founders, Mr. and Mrs. Penrose, involved as officers or directors in either the El Pomar Foundation or Broadmoor Hotel. This has been a major concern expressed by the Treasury through the years but does not apply in this case Broadmoor Hotel pays full taxes-Federal, State and local-and is not involved in unfair competition with any similar taxpaying entity. Section 4943 has been an impediment to the foundation in its conduct of business and restricts the way in which the trustees exercise their fiduciary responsibilities. We would share comments and endorse statements which indicate that repeal of section 4943 is appropriate. The ownership of Broadmoor Hotel by the El Pomar Foundation is a clear example that there should be latitude involved in section 4943, and we would urge the committee to support S. 1464. Thank you, Mr. Chairman, and members of the committee.

Senator ARMSTRONG. Thank you, Mr. Hybl. I have a question or two for you, and perhaps Senator Long will as well, but before we get to that, let me call on Mr. Morris who is here to represent the Altman Foundation. Would you tell us a bit about that? I am not as familiar with the facts of the Altman Foundation case, although I am generally familiar with it. But perhaps you could take a minute in your statement to give us some background on that. And I take it that what you are seeking, if that is not clear from your statement, that you would spell that out. So far as we know, the Altman Foundation would not be covered by this specific bill, but I gather you are seeking some similar relief.

[The prepared statement of William S. Hybl follows:]

TESTIMONY OF

WILLIAM J. HYBL, PRESIDENT

EL POMAR FOUNDATION

AUGUST 1, 1983

I

Mr. Chairman and Members of the Subcommittee, my name is William J. Hybl and I am President of the El Pomar Foundation. appreciate the opportunity to testify before you on the subject of Excess Business Holdings by private foundations.

Organized in 1937, the El Pomar Foundation has a forty-six year history of philanthropy within the State of Colorado, having made grants in excess of $75,000,000. This statement sets forth a history of the El Pomar Foundation and respectfully requests relief from Section 4943 (Foundation Excess Business Holdings of the

Internal Revenue Code).

It is helpful to understand the background of the El Pomar Foundation and its one hundred percent ownership of the BROADMOOR Hotel, Inc. The BROADMOOR Hotel was built in 1918 in Colorado Springs, Colorado by Spencer Penrose. It was intended and continues to be one of the truly fine resorts in the world. Prior to his death in 1939, Spencer Penrose directed the charitable purpose of the Foundation was to use the principal and income of the Foundation "for such charitable uses and purposes (including public educational, scientific and benevolent uses and purposes) exclusively as will, in the absolute and uncontrolled discretion of the trustees of the corporation most effectively assist, encourage and promote the general well being of the inhabitants of the State of Colorado".

Pikes Peak region of Colorado.

Penrose, was one of the pioneers in the development of the He first came to Colorado Springs in 1891. Over a period of the next twenty-five years he accumulated a substantial fortune from real estate and mining activities in the area. His first big strike came from his ownership of an interest in a gold mining claim, the Cash on Delivery Mine in the Cripple Creek, Colorado area. His largest gains were made from the Utah Copper Company which was formed by him and his associates in the early 1900's. The Utah Copper Company was ultimately merged into Kennecott Copper Company in 1923.

In 1915 Spencer Penrose began to turn his attention from mining to the investment of his fortune and other interests which were of a less profitable but more satisfying nature. In 1915 he commenced the construction of an automobile highway to the summit of Pikes Peak, which was completed in 1916. He inaugurated the Pikes Peak Hill Climb race for automobiles which continues today. The Pikes Peak Highway has been donated to the government and is now operated by the City of Colorado Springs.

As previously indicated, the Foundation has made charitable grants of over $75,000,000, including The Colorado College, The Penrose Hospital for Cancer Research, the Regional Library for the City of Colorado Springs, the University of Denver, Chicano Education Project, Domestic Violence of Colorado Springs, and Silver Key Senior Services. (Appendix A) The Foundation has placed an emphasis on capital construction programs and rehabilitation of existing facilities.