Board Agenda - September 05, 2006

k. Reclassification of the Mary Ida Carpenter School Fund; appoint counsel to represent district

Presenter: Richard Matkin

Purpose: A - Request decision - closure required

Time: No time limit

Description:

The Last Will and Testament of Roy Carpenter provided upon the death of his wife, Helen Taylor Carpenter, that a perpetual, irrevocable, charitable trust, to be known as the "The Mary Ida Carpenter School Fund" be created in the amount of $10,000. The trust was created in November 1976 with Republic National Bank of Dallas serving as Trustee. In April 1978 Republic National Bank of Dallas filed a petition with the District Court of Collin County to resign as Trustee and name the Trustees of Plano Independent School District as the Trustees for the fund. The court granted the petition in May 1978.

A Letter of Determination from the Internal Revenue Service dated April 1979 deemed the legal status of the fund to be a Private Foundation under Section 509(a) of the tax code. The fund has functioned as a Private Foundation since this time and has complied with the filing of 990 tax forms, publications of notices and payment of taxes. With the decline in interest rates a couple of years ago, the decree of Mr. Carpenter's will to only distribute "the net income as a scholarship award to an outstanding Plano High School scholar" came in conflict with requirements from the IRS for the Fund to make a mandatory 5% distribution that exceeded the interest earned. A letter was sent to the IRS in 2005 questioning the classification of this fund as a Private Foundation. On August 21, 2006, we received a letter from the IRS in response to our inquiry. The IRS is agreeable to the request to change the status of the Fund from a Private Foundation to a Supporting Organization under Section 509(a)(3) of the tax code. The Fund meets the definition in the tax code for a Supporting Organization as it is organized and operated exclusively for the benefit of one or more public organizations. Since the $10,000 is invested and controlled by Plano Independent School District and there is no identifiable organization outside of Plano ISD known as the Mary Ida Carpenter School Fund, the change in the classification of this Fund will provide a more efficient and less costly administering of the $10,000 investment and will allow the District to honor the decree of Mr. Carpenter's will for many years to come.

Recommendation:

Approve Mr. Tyree Collier of the Jenkens & Gilchrist law firm to file all necessary forms with the IRS by signing Power of Attorney and Declaration of Representative form. Authorize the District to proceed with the filing of all necessary forms to change the legal tax status of the Mary Ida Carpenter School Fund to that of Supporting Organization.

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