TESTIMONY OF

WILLIAM J. HYBL, PRESIDENT

EL POMAR FOUNDATION

AUGUST 1, 1983

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.

I

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".

Penrose, was one of the pioneers in the development of the

Pikes Peak region of Colorado. 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.

The Foundation has continued to own the BROADMOOR Hotel and hire management which has oriented itself to the needs of the people of Colorado Springs and Colorado in general. The trustees of the Foundation have consistently placed service to the community and the general welfare of the residents of the State of Colorado as highest on their list of priorities. The BROADMOOR Hotel is subject to the corporate income tax imposed by Section 11 of the Internal Revenue Code in the same manner as other hotel corporations, or any tax-paying corporation for that matter.

Its founder,

There is no donor control of El Pomar Foundation. Spencer Penrose, died in 1939 and his wife in 1956. Since then there has been no member of the Penrose family associated with the Foundation or its holdings in any capacity. There have been no instances of self-dealing, and the Foundation has consistently distributed its income for charitable purposes on a current basis in compliance with prevailing law. (Appendix B) The trustees have never made any investments which were not motivated by the specific charitable purposes of the Foundation or which would in any way jeopardize the ability of the Foundation to do so. The Foundation. prints and distributes an Annual Report with financial statements, guidelines and other correspondence so that prospective grantees will know how the funds of the Foundation are available, being managed, and distributed for their benefit.

During consideration of the 1969 Tax Reform Act the Senate Finance Committee received written testimony from the trustees of El Pomar Foundation urging the Committee to delete the provision in the

House-passed Bill requiring private foundations to divest their excess business holdings. The trustees' testimonies set forth the history of the El Pomar Foundation, the charitable activities of the Foundation and the adverse effects on the Colorado Springs community if the BROADMOOR Hotel were required to be sold by the Foundation.

"Our greatest concern is the future of the BROADMOOR
Hotel. If the Foundation were required to sell The
BROADMOOR the only potential purchasers who could afford
to purchase it would be major hotel chains or perhaps one
of the large conglomerate corporations. In either event
the result would be absentee ownership by an organization
which had no special interest in the welfare of Colorado
Springs or the inhabitants of Colorado generally. Indeed,
management of such an organization would probably not even
be aware of many of the problems of the area. Any organi-
zation which was oriented primarily towards the profit
motive rather than public service would undoubtedly
curtail many of the activities presently being conducted
by The BROADMOOR
We submit there is nothing
inherently bad in having a charitable foundation own a
controlling interest in a business enterprise. We see
nothing wrong in having the profits of an operating
business corporation inure to the benefit of the public at
large, rather than just to certain private stockholders.
We think the public welfare is better served by having the
beneficial ownership of the BROADMOOR Hotel in the

citizens of the State of Colorado rather than the
stockholders of some major hotel chain corporation

Senator Gordon Allott of Colorado testified in 1969 before the Senate Finance Committee in support of the written remarks of the trustees of the El Pomar Foundation (Senate Finance Committee Hearings, page 4357). In response to this testimony, the Senate Finance Committee provided a grandfather clause for the El Pomar Foundation. The grandfather clause, which would have allowed retention of the BROADMOOR Hotel by El Pomar Foundation, was passed by the Senate; however, was then omitted in the Conference Committee Report. The current law, Section 4943, as approved by the Conference Committee and signed into law by the President in 1969, provides that a business that is one hundred percent owned by a private foundation as of May 26, 1969, is required to accomplish a three-stage period of forced divestiture:

(1) During the twenty year period, 1969 through 1989, the private foundation may continue to own 100% of the stock of the business.

(2) By May 26, 1989, however, the foundation must reduce its ownership to 50%.

(3) Finally, by May 26, 2004, the foundation must reduce its ownership by 35% where it may remain forever.

El Pomar Foundation seeks legislation which would recognize its position as a foundation established over forty-five years ago with no substantial contributors or their lineal heirs associated with its operation for the past twenty-five years.