This statement is submitted for the record on behalf of Houston Endowment Inc. of Houston, Texas in response to the hearing on S. 1464 held on August 1, 1983 by the Finance Subcommittee on Taxation and Debt Management. S. 1464 represents one solution to the divestiture problem presented by I.R.C. of 1954 $4943. The problem presented by $4943 is also of major concern to Houston Endowment Inc. Agreeing with the concept of S. 1464 that I.R.C. of 1954 $4943 should be repealed or overriden in certain instances, this statement presents a discussion of the problems caused by $4943 and a discussion of a legislative solution to the problem currently being considered in the U. S. Senate. HOUSTON ENDOWMENT INC. GENERAL INFORMATION Houston Endowment Inc. ("Endowment") was organized in 1937 by Jesse H. Jones and his wife, Mary Gibbs Jones. Mr. Jones is best remembered for his services during the Franklin D. Roosevelt administration as Secretary of Commerce and as head of the Reconstruction Finance Corporation. Prior to his death in 1956, Mr. Jones pursued a policy of making substantial annual gifts to Endowment, and Endowment was named as principal beneficiary in his will. A large portion of Endowment's activity has been in the field of education, and major emphasis has been placed on the establishment of scholarships in colleges and universities throughout the United States. This has been done in two ways. First, Endowment has established scholarship programs with a number of colleges and universities. These institutions assume responsibility for administering the scholarships, including determining the amount Second, of each scholarship and the recipient of each scholarship. Endowment inaugurated a program in 1958 which has continued to this date involving an arrangement with the Houston Independent School and contiguous school districts and private parochial schools whereby such school districts and schools make nominations from their graduating high school students. An impartial group of substantial citizens, not connected with Endowment, choose the scholarship winners on the basis of achievement, economic need and leadership potential. Scholarship winners are not restricted as to the subject in which they may major, and they may attend any accredited college or university of their choice in the United States. Since the inception of this one program, 3,382 students have received scholarships and have attended over 241 colleges and universities. 597 college students are attending college on such Jones scholarships on this date. The scholarships granted under this program since its inception aggregate $9,725,500.00 as of December 31, 1982. Endowment has made many educational, charitable, cultural, medical and civic grants. The following is a short, partial listing to illustrate the scope and nature of them: Moody House, Inc., Galveston, Texas Home for Aged, Gifts of Real Property Jewish Community Center, Houston Purchase of Campsite in Fort Bend County Union y Progresso Barrio Development Inc., Houston Neighborhood Medical Clinic and Senior Citizens Center Eliza Johnson Home for Aged, Houston Capital Funds and Support of Program The Arthritis Institute of The National Orthopedic and Rehabilitation Hospital, Fellowship Endowment Hermann Hospital, Houston Completion of 8th and 9th Floors and Texas Tech University, Health Science Center, Amarillo, Texas Scientific Research Library in Amarillo Texas Heart Institute, Houston Expansion of facilities Southwestern University, Georgetown, Texas Construction and Rehabilitation of Educational Properties 5,720,000 325,000 1,103,608 445,000 200,000 6,300,000 250,000 2,000,000 5,000,000 As of December 31, 1982, Endowment's grants for educational, charitable, cultural, medical and civic purposes aggregated $214,315,674.30. Attached is a tabulation covering the past six years, showing the fair market value of Endowment's assets for each year, and the Distributable Amount and Qualifying Distributions, all as reported by Endowment to the Internal Revenue Service. The 1982 figures are estimated. RECOMMENDED CHANGES IN EXISTING LAW Endowment is the owner of all of the capital stock of Houston Chronicle Publishing Company, a Texas corporation, which publishes the Houston Chronicle, a daily newspaper of general circulation in Houston and surrounding areas. In 1969, Section 4943 was added to the Internal Revenue Code. The general effect of this Section is to require a private foundation (as defined in Section 509 of the Code) to dispose of its ownership in the assets or stock of any "business enterprise" (as defined in Section 4943) within a specified period of time. Exceptions contained in Section 4943 permit a private foundation |