Permissibility To Establish And Fund A Private Nonprofit Charitable Foundation - Q2 1999By the Division of Banks
A bank seeks to establish and fund a private, nonprofit charitable foundation under Mass. Gen. Laws chapter 180 and to apply for an exemption under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. The foundation would be established in mutual rather than stock form. Mass. Gen. Laws chapter 167F, section 2, paragraph 29 permits state-chartered cooperative banks to "contribute such sum or sums of money as ... the board of directors in a cooperative bank ... may determine to be reasonable, (a) to any private nonprofit organization for improving the social and economic conditions, including community development programs ... in communities in which any such institution has an office or branch ...". It is the position of the Division that the establishment of the foundation will merely involve a charitable contribution by the bank, and therefore would not require the Division's approval. It should also be noted that the word "bank" should not be used in the name of the foundation. In addition, individuals serving as directors and officers of the bank and foundation have separate fiduciary duties to each entity and should be reminded that the foundation is for charitable purposes and not the benefit of the bank.