Ask the Scholar

Document scope · 1 page
doc
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory. For page-specific OCR and visual context, open one of the page chats.

Scholar Source Context

Document identity
localId
323154708
label
National Fraternal Congress 12/88 [OA 4425]
core
doc
dtoType
document
pageCount
1
Source metadata
Source extras
naId
323154708
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
484b1c6c7f1456bf
ocrText
Originally Processed With FOIA(s): FOIA Number: S FOIA MARKER This is not a textual record. This is used as an administrative marker by the George Bush Presidential Library Staff. Record Group/Collection: George H.W. Bush Presidential Records Collection/Office of Origin: Speechwriting, White House Office of Series: Grant, Mary Kate, Files Subseries: Subject File, 1988-1991 OA/ID Number: 13882 Folder ID Number: 13882-010 Folder Title: National Fraternal Congress, 12/88 Stack: Row: Section: Shelf: Position: G 19 2 7 7 December 13, 1988 Walter Vinyard of the National Fraternal Congress (298-8660) called the Public Affairs Office on 12/13/88. The NFC represents 100 fraternal organizations which provide insurance and lodges for their members -- such as the Knights of Columbus and the Lutheran Brothers. The group represents a large segment of the volunteer movement and is strongly pro-Bush. Fraternal organizations enjoy unique statutory exemption status in federal tax law, and have since 1909. They are exempted at a higher order than, for example, churches. In 1985, Treasury proposed taxing fraternal societies (and their insurance for members), but the Reagan White House removed the proposal from the budget negotiations at the time. Vinyard is concerned because he received a call from Treasury two weeks ago, asking for the income figures on his member groups. As this was unprecedented, he asked why and was told it was "for the budget." Vinyard thinks that the Administration is considering changing revenue assessments for fraternal organizations and believes that the budget process will move very quickly, as budget negotiations/proposals from the new Administration are expected by the Inaugural. He is asking to discuss this with Treasury and OMB before the budget process begins, within the next month or so. RESIDENCE (703) 683-6838 WALTER DARNALL VINYARD, JR. 888 SEVENTEENTH ST., N.W. ZUCKERT, SCOUTT & RASENBERGER WASHINGTON, D.C. 20006-3959 ATTORNEYS AT LAW TEL. (202) 298-8660 LAW OFFICES ZUCKERT, SCOUTT & RASENBERGER BRAWNER BUILDING COATES LEAR (1915-1963) 888 SEVENTEENTH STREET, N. W. EUGENE M. ZUCKERT JERROLD SCOUTT. JR. OF COUNSEL RAYMOND J. RASENBERGER WASHINGTON, D. C. 20006-3959 LINWOOD HOLTON MARVIN S. LIEBERMAN J. MICHAEL KEELING FRANK J. COSTELLO TELEPHONE: (202) 298-8660 EDGAR T. BELLINGER RALPH L. KISSICK TELECOPIERS: (202) 342-0683 JAMES L. DEVALL JOHN T. STEWART. JR.' (202) 342-1316 WALTER DARNALL VINYARD. JR. WILLIAM M. CALLAWAY. JR. TELEX: 89648 RACHEL 6. TRINDER CHARLES J. SIMPSON. JR. MONIQUE E. YINGLING RICHARD A. ALLEN ELENA W. KING MALCOLM L. BENGE JAMES A. HARRIS EVAN M. MIGDAIL ANDREW R. PLUMP ROBERT M. HALLMARK JAYME RIZZOLO EPSTEIN JULIE A. TIGGES' RICHARD P. SCHWEITZER December 8, 1988 "NOT ADMITTED IN D. C. Ms. Edith Brashares Office of Tax Analysis U.S. Department of the Treasury 15th Street at Pennsylvania Avenue, N.W. Washington, D.C. Dear Edith: Enclosed are the individually completed fraternal beneficiary association questionnaires dated October 21, 1988. If any of the answers are unclear or any other information is needed, please don't hesitate to let us know. All of the societies under study want to make certain that you receive satisfactory information in any area of interest. We remain ready to assist you at any time. We also include copies of the five previous submissions to your office concerning: (1) History of the Unique and Specific Federal Tax Exemption for Fraternal Beneficiary Societies, (2) Unrelated Business Income Tax Returns, (3) Membership Standards, (4) samples of literature, and (5) fraternal activities over a 30 year period. I know that you intend to cover each of these areas in the study. We look forward to a fair and balanced report. Our invitation stands for Treasury staff to visit one lodge meeting of each society under study. Fraternalism can only be understood by experiencing its vitality directly. America's fraternal. benefit societies are much more than a compilation of statistics. We believe they are a large part of the "thousand points of light" which makes the volunteer spirit alive in the United States. We hope you will come to see for yourself. ZUCKERT, SCOUTT & RASENBERGER Ms. Edith Brashares Page - 2 - December 8, 1988 After you have had an opportunity to make a preliminary review of the enclosures, we would very much appreciate the opportunity to meet with you and Tom and any other appropriate OTA staff members to discuss the fundamental public policy questions at issue. We hope this could be done by December 16. Best regards. Sincerely Water yours, Walter D. Vinyard, Jr. WDV CSS LAW OFFICES ZUCKERT, SCOUTT & RASENBERGER BRAWNER BUILDING COATES LEAR (1915-1963) 888 SEVENTEENTH STREET, N. W. EUGENE M. ZUCKERT OF COUNSEL JERROLD SCOUTT. JR. RAYMOND J. RASENBERGER WASHINGTON, D. C. 20006-3959 LINWOOD HOLTON J. MICHAEL KEELING MARVIN S. LIEBERMAN FRANK J. COSTELLO TELEPHONE: (202) 298-8660 EDGAR T. BELLINGER RALPH L. KISSICK TELECOPIERS: (202) 342-0683 JAMES L. DEVALL (202) 342-1316 JOHN T. STEWART. JR. WALTER DARNALL VINYARD. JR. WILLIAM H. CALLAWAY. JR. TELEX: 89648 RACHEL B. TRINDER CHARLES J. SIMPSON. JR. MONIQUE E. YINGLING RICHARD A. ALLEN ELENA W. KING MALCOLM L. BENGE JAMES A. HARRIS EVAN M. MIGDAIL ANDREW R. PLUMP ROBERT M. HALLMARK JAYME RIZZOLO EPSTEIN JULIE A. TIGGES RICHARD P. SCHWEITZER "NOT ADMITTED IN D. C. September 20, 1988 Ms. Edith Brashares Office of Tax Analysis U.S. Department of the Treasury 15th Street at Pennsylvania Avenue Washington, D.C. 20220 Dear Edith: In response to the request from your office on July 14, we are pleased to submit the enclosed explanations of fraternal activities over a 30 year period for each of the seven fraternal benefit societies under study. In every instance fraternal activities have increased in quantity and quality. Currently each society's fraternal programs are more vigorous than at any other time in their history. In addition to protecting members and their families, the seven societies have multiplied efforts in volunteer, social, religious, patriotic, educational, charitable and benevolent areas. The enclosures provide an overview of the expanding contribution of these seven fraternals to American society. It is by no means an exhaustive catalogue. Much more background information is available if you wish to review it. Fraternal benefit societies are unique. They are not insurance companies, membership clubs, educational organizations, or public charities. They are member governed, non-profit, mutual aid organizations which insure members and their families against death, disease and disability and which maintain an active lodge system for fraternal association and outreach. We hope the enclosures demonstrate that American fraternalism is alive and well. ZUCKERT, SCOUTT & RASENBERGER - 2 - In isolation the effect of a single fraternal lodge transporting retarded people or sheltering hurricane victims may not have much impact in comparison to the federal budget, but the cumulative effect of millions of such benevolent acts is enormous. Without tax exemption this would not be possible. Fraternal volunteer programs extend to the public at large in communities where lodges are located. Local fraternalists support community benevolence and charity. Lodges themselves initiate and participate in numerous acts of service. Lodges also implement programs initiated and funded by their own national fraternal society. Viewed in the aggregate, the overall community impact of fraternal volunteers cannot be underestimated. In the lodge system authority and responsibility flow from the bottom upwards. Each lodge is self-governing. National fraternal organizations provide financial, personnel and program assistance to local lodges. The lodge system is expensive to maintain, support and nurture. National societies often initiate, develop and fund fraternal programs. Seed money and grants from national organizations generate additional contributions at the local level when volunteers implement fraternal programs. One tax-exempt dollar from the national society can produce multiple returns by local lodges. To assist you and your colleagues in understanding the lodge system, we extend a cordial invitation for Treasury Department staff at our expense to visit one lodge meeting of each of the seven societies under study. We very much hope that you will be able to do SO. By focusing upon only large fraternals, the study mandated by Congress seems to imply a negative connotation to growth. We hope the enclosures will help to demonstrate that large fraternals remain faithful to all of their historic exempt purposes, fraternal as well as beneficial. Professor Peter F. Drucker commented recently that "many non-profits have become vastly more productive during the past ten years. He believes this is because non-profits have discovered management: Twenty years ago 'management' was bad word in non-profit institutions; it meant 'big business. Far too many of these institutions then believed that good intentions and a noble cause are all that is needed to produce results -- and quite a few, of zuckert, SCOUTT & RASENBERGER - 3 - course, still do. But more and more are learning that good intentions by themselves only spawn bureaucracy. Twenty years ago non-profit institutions tended to believe that they did not have to 'manage' because they did not have a 'bottom line.' More and more of them have since learned that they have to manage especially well precisely because they lack the discipline of the 'bottom line. There are no statistics on the total number of people who serve as volunteers in non-profit organizations. But they are almost certain to constitute our largest single 'employment. 1 ... Government has become too big, too complex, too remote for each citizen actively to participate in it. Yet we no longer believe, as did the 'liberals' and 'progressives' these past hundred years, that community tasks can -- nay, should -- be, left to government. As a volunteer the individual can again find active, effective citizenship, can again make a difference, can again exercise control. This is a uniquely American achievement; it may well be America's most important contribution today. * The seven fraternal benefit societies discussed in the enclosures are an important part of what Professor Drucker states is "America's most important contribution." We hope that you will visit their lodges in various communities throughout the nation in order to understand them more fully. I am available at any time to provide you and your colleagues with any additional information or to try to answer any questions as they arise. water Sincerely yours, Walter D. Vinyard, Jr. * Peter F. Drucker, "The Non-Profits' Quiet Revolution,' The Wall Street Journal, p. 30 (September 8, 1988). AAL During the period 1955-1985, fraternal expenditures by AAL (Aid Association for Lutherans) increased 9,947% as follows: 1955 $ 361,282 1965 2,216,644 1975 7,878,983 1985 36,296,922 Simultaneously, assets grew at a rate of 1,776%: 1955 $ 209,374,791 1965 544,833,224 1975 1,318,595,249 1985 3,927,583,727 AAL's purpose is to bring together Lutheran people to pursue quality living through financial security, volunteer action, and help for others. (Exhibit 1.) A sampling of AAL fraternal programs since 1960 discloses AAL's fraternal commitment: 1960 : Scholarships totaling $93,000 were awarded to young people studying at seminaries to become pastors, teachers, and lay leaders of Lutheran Synodical Conference churches. -- More than $360,000 was distributed by AAL to local branches to aid benevolent works, including support to local church projects, parochial schools, Lutheran colleges and seminaries. -- At least $47,500 was granted to Synodical Conference charitable institutions, and to projects promoting Lutheranism. - 2 - 1975 -- More than 7,000 pints of blood were donated through the efforts of 264 AAL blood donor clubs. -- Throughout AAL, Project Care benevolences were being undertaken to meet specific human needs such as literacy training in California, emergency short-term care in Delaware, a senior citizen center in Illinois, day care centers in Wyoming, and ear and eye screening programs for pre-schoolers in Oregon. -- AAL scholarships were awarded through AAL's All-College Scholarship Program under which 150 scholarships of up to $1,750 annually (1971 figures) are awarded, renewable for up to three years. 1985 -- 88 orphan fraternal benefit grants were made, consisting of amounts ranging from $66 to $200 a month to children of deceased AAL members. -- AAL supported higher education with grants totaling $5.1 million. AAL competitive scholarships were awarded to 550 members. 13,250 others were helped through other scholarships and grants-in-aid. -- AAL provided a grant to help produce a two hour public television program about the life and work of Johann Sebastian Bach, the most famous Lutheran composer in history. -- Through four benevolence programs (Helping Hands, Community Action, Disaster Response and CO-OP), AAL provided almost $7.7 million dollars during 1985 to help branches conduct local work or service projects and to raise over $6.1 million dollars to benefit needy people and organizations. -- AAL contributed almost $1 million to the restoration of the Statute of Liberty. - 3 - -- 283 Lutheran congregations received grants totaling $157,000 to help observe milestone anniversaries. In 1987, AAL inaugurated a drug abuse prevention program, "Get Involved Before Your Kids Do." This million dollar program is designed to educate parents of elementary and junior high school students about substance abuse and provide them with the skills and confidence to communicate effectively within the family about drugs and alcohol. A $300 community outreach grant is available to each branch conducting this program to aid in the war on drugs. (Exhibit 2.) BRANCH SYSTEM AAL members elect AAL's board of directors annually. AAL fraternal and benevolent activities are conducted through AAL's 6,833 branches. In 1985 AAL members devoted over 1.8 million volunteer hours to charitable projects. In 1986 more than 615,000 people were helped through AAL branch programs. In 1987 15,000 projects helped others in need. AAL contributed $10 million to these benevolence activities. Another $7.5 million was raised by AAL volunteers. (Exhibit 3.) - 4 - AAL supports branch activities with two types of funding, branch funds and benevolence dollars. (Exhibit 4.) As Lutherans, AAL members direct a substantial part of their benevolent activities to Lutheran churches and institutions. In 1985, AAL gave $5.8 million in grants to Lutheran high schools, colleges, seminaries, camps, and church bodies. Examples follow of AAL branch grants and the programs they supported in 1985: AAL Branch Funds. AAL provides branch funds semiannually to assist branches with expenses such as supplies, telephone expenses, printing, rent, and postage. Although not intended for benevolence, branch funds can be used for charitable purposes in emergencies. The amount each branch receives is based upon the number of members in each branch and the branch rating. Branches which undertake more fraternal and benevolent activities will receive increased branch funds in the following year. Community Action Benevolence. AAL encourages branch outreach in local communities with grants of up to $2,500 to purchase materials to improve community-owned property. Branch volunteers plan and control projects and supply physical labor. Examples include landscaping community-owned parks and constructing a community baseball diamond. - 5 - Cooperative Benevolence. AAL makes grants of up to $5,000 ($10,000 if two or more branches are involved) to supplement funds raised at the branch level to provide assistance to an individual or a family in need as a result of an accident, illness, or disaster. Examples include the cost of providing temporary living expenses for a family which lost its breadwinner through illness, and the purchase of a wheelchair for a disabled person. Cooperative benevolence grants also are made to supplement funds raised at the branch level to provide tangible items for an agency, an institution, or a community. These grants, in amounts of up to $2,500 (or $5,000 if two or more branches are involved) are made to support such projects as the purchase of a television set for a local home for the aged, or equipment for a local volunteer fire department. The branches themselves identify projects for cooperative benevolence grants. Disaster Response Benevolence. AAL assists branches aiding disaster victims with grants of up to $2,500. These funds must be used for the rent or purchase of equipment, materials, or supplies needed by disaster victims. Disaster response funds - 6 - have been used by branch volunteers to harvest crops for a disabled farmer, to set up a food station, and to clean up communities after flood, fires and explosions. Helping Hands. Grants of up to $250 are made to purchase materials or supplies to aid a family in need, or a nonprofit agency, institution, congregation or community. Helping Hands grants have been used by branch volunteers to build playground equipment, install smoke alarms, or to arrange birthday parties for residents of senior citizen homes. EDUCATION AAL has a continuing commitment to the education of Lutherans and to Lutheran educational institutions. In 1987, more than 5,000 AAL members. received $2.2 million in scholarships. A breakdown of the most important AAL education programs follows: AAL College Scholarships. At least 400 are awarded each year to select high school seniors. Two hundred of these are renewable, another 200 are non-renewable. - 7 - Competitive Nursing Scholarships. Available to AAL members who enroll in a registered nursing program. Lutheran Campus Scholarships. Available to AAL members enrolled at 51 Lutheran colleges on the basis of need and ability. Lutheran American Ministry Scholarships. Available to Lutheran American ministry students, either AAL members or nonmembers enrolled at Lutheran colleges. Vocational/Technical School Scholarships. Available to AAL members who are pursuing associate degrees or vocational diplomas in vocational/technical programs. Distinguished Presidential Fellowships. Awarded in the amount of $12,500 each to professors at Lutheran seminaries. Missionary Scholarships. Available to missionaries and their spouses to enrich their training and professional growth, especially in sabbatical years. Lutheran Hospital Nursing Scholarships. Available to AAL members who are pursuing nurse's training at Lutheran hospitals. - 8 - Lutheran Institution Support Program. AAL supports Lutheran seminaries and high schools with support grants and scholarships. Employee Gift Matching. AAL matches up to $2,500 of voluntary contributions by employees to Lutheran institutions. In 1985, 235 institutions received assistance; 474 employees participated in the program. OTHER DIRECT MEMBER BENEFITS AAL provides members with the following additional direct member benefits: Orphan Fraternal Benefit Program. AAL provides amounts ranging from $60 to $200 monthly, per family, to children of deceased AAL members. An edycation grant of up to $1,750 per year also is available for orphans attending a post-secondary educational institution up to the age of 23. In 1985, 88 orphans benefitted from this program. Family Fraternal Benefit Program. A one-time benefit of $1,500 is provided to eligible AAL families whose live-born child dies within the first 60 days of his life. A benefit of $750 is paid to eligible AAL families who bear a stillborn child at least - 9 - 20 weeks after gestation. This program also provides $2,500 of life insurance coverage for a newborn child less than 60 days old of an AAL family, at standard rates, regardless of the child's health. AAL provides a $2,500 certificate of insurance to AAL children of more than 60 days, but less than 16 years old, when the child is actuarially uninsurable. HEALTH ACTIVITIES AAL encourages branches to conduct activities which help members and others in their community in daily living and/or personal relationships. Branches may select topics from AAL's film library. AAL provides printed materials explaining programs which AAL develops. ENCORE. Married couples meet with an AAL trained couple to discuss ways to nurture and strengthen their marriages. Estate Planning. Members learn about estate planning and are encouraged to prepare plans that meet their personal objectives. - 10 - Health Fairs. Health fairs are designed to provide AAL members and the community at large with information about health resources. Health fairs include several activities which help people assess their health and to plan for better health. Improving Your Personal Wellness. Participants use AAL's "Well Now!" kit to assess their health habits and identify a specific behavior they want to improve. Link-Age. AAL provides resources for a workshop to bring together adults who are caring for their parents and other older family members. Managing Stress. AAL provides program materials to help AAL members and the community learn about stress and ways to cope with stress. Smart Pre-Retirement Planning. This program is open to AAL members and community members who want to plan for retirement by focusing on retirement attitudes, financial concerns, leisure activities, health, housing, and legal needs. Talking Money. This AAL program helps parents and other adults educate children on how to handle money. - 11 - Grief Helper Kit. AAL provides members with materials to help strengthen and develop the skills of individuals who want to provide help and information to grieving persons. RECOGNITION AND SOCIAL ACTIVITIES Special celebrations occur during which branches honor significant milestones or accomplishments. Examples are: - Honoring an important contribution to the community. - Birthday parties for elderly branch members. - Gifts for baptisms and graduations. - Mother/Daughter, Father/Son banquets. - Sweetheart dinners for couples married 25 years or more. - Father's Day and Mother's Day dinners. - Coffee hours to welcome new church members. INDEPENDENT ORDER OF FORESTERS During the period 1955-1985, fraternal expenditures by the Independent Order of Foresters ("IOF" or "Foresters") increased 4,605% as follows: 1955 $ 171,262 1965 $ 830,413 1975 $3,451,888 1985 $8,051,578 Simultaneously assets grew at a rate of 2,523%: 1955 $ 60,921,400 1965 $ 195,185,900 1975 $ 545,199,317 1985 $1,606,602,452 The Foresters' creed states: WE BELIEVE -- with malice toward none, with arms extended in friendship and concord toward all men of goodwill and good standing, that we members of Forestry will travel through life safe in the protective arms of our great Fraternity; happy in the knowledge that we shall not be alone when in distress and glad, should the occasion arise, to extend a helping hand to our fellow man. WE BELIEVE -- that united we may hold back adversity which, alone, would overwhelm us, our children and our homes. WE BELIEVE in God, in the greatness of our Country and in the spirit and the practice of Democracy. - 2 - The Foresters are seriously committed to socially responsible, charitable efforts in every community in which they exist. Local courts help such organizations as Big Brothers, Muscular Dystrophy, Cancer and the Heart Association. There are numerous programs for the donation of medical equipment and fund drives for hospitals, research and prevention of child abuse. Prevention of child abuse has increasingly become a major focus. For over a decade, educational films and booklets have been produced and distributed through the Order's Prevention of Child Abuse Fund, which also provides financial assistance to organizations serving the needs of abused children and troubled families. Every penny raised for the Fund is used to fight child abuse. The IOF absorbs all administrative costs, while the President and Board Members of the Fund serve without remuneration. Since 1977, the Fund has awarded 256 grants to 164 recipients in 43 states in the U.S. representing a financial total of $595,161. In 1988, the Order proclaimed an annual IOF Child Abuse Awareness Week in conjunction with National Child Abuse Awareness Month. IOF Courts all over the nation participated in special events and programs to stimulate awareness. In California the IOF Network produced a five-part cable-television series that - 3 - aired to audiences in San Diego County. The program encompassed the Order's child abuse prevention films with panels of local professionals in an update discussion of each film's topic. The Foresters sponsored a special educational insert on child abuse prevention in the November 1988 issue of Family Circle magazine. Family Circle has a circulation of almost 185,000 and the IOF will also continue to offer copies of this helpful booklet to its members, employees, the general public and community service organizations, upon request. Substantial donations of money and hundreds of thousands of volunteer hours have been given by the Foresters towards the Child Abuse Prevention Program as well as many other charitable causes for public benefit. In the U.S. alone during 1987, IOF Courts reported over 131,939 man hours in services to their communities as well as donations of 3,929 pints of blood and total monetary donations of over $767,267. The Foresters conduct holiday coffee rest stop safety programs all across America. Every Court maintains a food pantry program for the distribution of food to needy families. - 4 - LOCAL LODGE SYSTEM It takes only 500 beneficiary members to institute a Court. with the financial backing and fraternal direction of the IOF Supreme Court, local Court members dedicate time and financial assistance to community service. In addition to the major fraternal and charitable activities that are recommended by the Order, each Court chooses its own social programs and community projects. STRUCTURE OF THE LOCAL COURTS The Foresters' Constitution and Laws (Exhibit 1), detail the structure of a typical Court which follows a basic pattern. Individual members elect a Chief Ranger annually at the regular meeting. He is assisted by a slate of officers. The Chief Ranger appoints chairmen for various committees in the Court to involve more members and share the work load. A Vice Chief Ranger is also chosen to assist the Chief Ranger. He will accept responsibility of the Court for the following year. An Orator conducts the prayers and takes part in the ritual work of the Order. The Court's Treasurer is responsible for the finances of the Court. The Court's Secretary takes the minutes of the meetings and is in charge of all - 5 - correspondence. Senior and Junior Woodwards look after the regalia of the Court. The Trustees are in charge of the property of the Court. The Public Relations Officer prepares news releases and makes a variety of other efforts to publicize social and charitable events and projects, to encourage increased membership and community involvement in the Court's charitable work. A typical Forester Court has a number of special committees specifically designed to fulfill the organization's fraternal and charitable goals. A Sick Committee looks after sick members, and is in charge of organizing visits, as well as sending gifts and cards. The Benevolent Committee investigates all requests for financial assistance and gives money to those in need. The Activities Committee is in charge of all entertainment, social, and fraternal activities. A Youth Committee promotes junior work and convenes committees to arrange parties for young members and their families. A Project Committee studies the need for community projects and, upon approval of the Court, makes all the necessary arrangement for presentation of checks and equipment. All involvement for Court officers and all committee work is on a volunteer basis. - 6 - FRATERNAL ACTS The IOF sustains a Matching Fund Program in which the Order's Supreme Court allocates money to each High Court in order to supplement the funds raised to benefit selected worthy charities supported by Forester Courts. In addition, benevolent funds from the Order can be requested by Courts wishing to provide and supplement emergency assistance to select members. These funds provide essential help to individual Foresters and their families in the unfortunate case of natural disasters and instances of personal loss and tragedies. FRATERNAL BENEFITS Fraternal Benefits offered IOF membership have responded, over the years, to the growing changes and needs of society. These benefits include educational scholarships; cancer, TB and MS grants; financial assistance for orphaned children of members; a common carrier accidental death benefit; and living accommodations and maintenance for qualified indigent elderly members and their spouses. (Exhibit 2.) - 7 - There are two Forester Havens in the U.S. which provide quarters for qualified senior members and their spouses who no longer have the resources to maintain themselves. Havenites enjoy carefree living a private residence, meals, medical care, clothing, recreational activities, maid service, a friendly atmosphere, and a feeling of security. The Foresters provide intermediate and skilled nursing care for every resident. New units are constructed in advance of projected needs. The Orphan Benefit program provides monthly grants for the care and education of junior members and children of members who are orphaned. For children under five, the programs pays $150 a month. A child between 5-13 receives $180 a month and children 14-18 receive $210 per month. Under this program children may also receive up to $12,500 for their college education. Under the Scholarship Program, 125 renewable scholarships are awarded annually. A recipient may receive up to $1,000 per year for a maximum of four years, or until the student earns a bachelor's degree. Guaranteed Student Loans are available to IOF members, their spouses and children. Depending on the amount needed to meet education costs, up to $2,500 per academic year for undergraduate work and $5,000 for graduate work may be received. - 8 - Surviving dependent children of a deceased member in good standing may receive college scholarship grants of $1,000 a year for a maximum of four years. The Common Carrier Accidental Death Benefit provides a grant up to $100,000 for a member, $50,000 for a spouse and $25,000 for a dependent child in the event of accidental death. Cash Grants to members and dependents are available as follows: 1. Tuberculosis up to $5,000. 2. Multiple Sclerosis up to $5,000 3. Cancer up to $1,500. OVERVIEW OF LODGE ACTIVITIES The attached Exhibits and materials previously submitted contain extensive examples of Foresters fraternal and community activities. Outlined below are samples of these activities. 1957: O The Foresters' Polio Benefit program provides money and assistance to help polio victims learn to walk and otherwise cope with the disease. o The Foresters provide a Tuberculosis Benefit granting funds to those afflicted with the disease. A sanatorium located in Saramac Lake, New York is operated to provide care for members. - 9 - IOF Cancer Benefit provides care and treatment for cancer victims. IOF Orphan's Benefit provides aid to 2,700 children. IOF constructs a home in Southern California to provide care for elderly Foresters. 1977: The Foresters continue major programs for cancer, cystic fibrosis, orphans and homes for the elderly. The Florence Hallum Fund for the Prevention of Child Abuse is established. IOF raises money to build a park for the blind and handicapped in Washington state. IOF supports autistic welfare efforts and furnishes a child development center for handicapped children. IOF conducts a charity drive for the Sutter General Hospital for dialysis treatment in California. IOF holds a fund raiser for the Lung Association. IOF opens a Skilled Nursing Facility at the California Haven, the Forester home for the elderly. The facility contains 49 beds, 13 designated for the care of non- ambulatory patients. The facility has state of the art equipment for the care of patients. O IOF begins construction of a Skilled Nursing Facility for the Forester Florida Haven. 1987: IOF opens a fourth Forester Haven to provide living quarters for elderly Foresters. IOF members raise $6,000 to help a heart transplant patient in Massachusetts. The Forester Haven in California is upgraded. IOF Merrie Maids celebrate birthdays at the California Haven with special food and gifts. IOF produces a film starring George Kennedy to recruit men to join the Big Brothers program. Big Brothers/Big Sisters activities are often tied to Child Abuse Prevention Programs and - 10 - local events. Foresters invite little brothers and sisters to share IOF activities such as ball games, picnics, social events and field trips. IOF's Bowl for Kids Sake raises over $60,000 in Denver alone for Big Brothers/Big Sisters. To combat the problem of missing children, IOF's Court Royal in California set up a booth in a shopping center to offer parents free fingerprinting or footprinting of their children. Identifying marks were noted. Parents were given a lock of hair and a photograph for safekeeping. On December 7, 1984, the High Court of Southern California placed a plaque on the USS Arizona Memorial in Peal Harbor. It reads: "The Independent Order of Foresters remember in Liberty, Benevolence and Concord, the price paid for us to live free." IOF's Court Lehigh prepared Christmas dinner for 150 residents of a senior citizens home in Pennsylvania. Classes in cardio-pulmonary resuscitation were arranged for Foresters by Foresters. CPR equipment donated by IOF has trained thousands of instructors, who in turn are training others to save lives. In California, an important jurisdiction for IOF, an awards ceremony was held to honor citizens for community activities. Representatives of local governments, fire and police departments and other civic leaders attended to show appreciation. IOF operates 30 Forester Coffee Stops to help motorists over holiday weekends. IOF's San Francisco-Golden Gate Court bought four vans to transport handicapped persons to and from the San Francisco Recreational Center. IOF aids the Lorma Linda University School of Medicine with a fund-raising drive throughout Southern California and Hawaii. - 11 f. IOF sponsored a Children's Pet Parade in Ohio. In Massachusetts IOF members constructed a 104-foot long ramp at the home of a 10 year semicomatose child so she could be transported more easily for medical treatments. IOF set up relief centers and made grants to rebuild property devastated by flooding in Northern California. Foresters staffed each center inspecting damage, gathering photos and filing reports. Similar efforts helped victims of tornados. In Erie County, New York, IOF provides counselling through the self-help program, Parents Anonymous, which involves parents who feel they may be abusive. A 24-hour hot line is based in the home of an IOF member. The Foresters raised funds nationwide for the Doreen Trace Brain Center in Massachusetts. IOF produced the following films and video tapes to aid in its campaign against child abuse: O "Fragile, Handle With Care" produced by KTAR-TV in cooperation with The Independent Order of Foresters, is narrated by Mr. Bill Cosby. The film shows that mental and physical abuse of children is an old and increasing problem. Through reenactment of case histories, the film explores the questions of why, prevention, effects on the child, and legal considerations. "Victims" was produced by Mr. Church Wintner for the I.O.F. This award-winning film is an unrehearsed documentary narrated by Ms. Christina Crawford and examines the lasting effects of abuse on children This appears to be a direct relationship between some abused children becoming violent criminals later in life. Personal interviews with children, parents, doctors, and convicts give an in-depth look at the problem. "The Next Volunteer" was produced by Mr. Leetate Smith, President of the I.O.F., and written and directed by Mr. Herb Golden. - 12 - This film, narrated by Mr. Ed McMahon, illustrates the value of the activity of the volunteer. Actual conversations with volunteers and group therapy sessions give insight into the feelings of abusing parents who are working through their problems. O "One Out of Six" was produced by the New Image Teen Theater group of San Diego in conjunction with the I.O.F. and examines the child abuse issue of incest. This film, which is based on accounts of actual victims, stars and award-winning teen actor group. Designed to educate young people on the subject, the film attempts to demystify the issue of incest and opens avenues for further discussion on the subject. "There is Hope" focuses on incest treatment and what happens to families after incest is reported. It is designed for use with families in treatment as well as for general audience, to increase awareness and to encourage people who have suffered sexual abuse or perpetrated abuse that with treatment. The Foresters also make available the following booklets on child abuse: "What Everyone Should Know About Child Abuse" - English and Spanish "What Everyone Should Know About Sexual Abuse of Children" - English and Spanish "On Parenting" - English and Spanish "What Everyone Should Know About Disciplining Your Child" - English only "About Incest" - English only "You're In Charge" - English only (coloring book aimed at 3 to 8 year olds -- used by school and day-care staffs) "About Alcohol, Child Abuse and Child Neglect" - English only "About Adults Abused As Children" - English only KNIGHTS OF COLUMBUS During the period 1965-1985, fraternal expenditures by the Supreme Council of the Knights of Columbus (the "K of C" or "Knights") increased 642% as follows: 1965 $ 3,588,623 1975 $ 3,886,411 1985 $ 8,204,527 From 1955-1985, assets grew at a rate of 1;465% 1955 $ 109,581,567 1965 $ 281,228,300 1975 $ 594,880,436 1985 $1,714,947,151 In addition, the Knights annual survey of fraternal activity as of December 31, 1984 shows that K of C councils and Fourth Degree Assemblies disbursed $49 million for charitable and benevolent activities as follows: Youth activities $ 3,400,934 Church/community $ 7,374,452 Donations to the needy, sick, disabled and handicapped $13,370,797 Aid to disaster victims $ 570,603 Donations to welfare organizations, community projects, scouting, cancer, heart and other funds $ 6,007,261 Donations for scholarships, schools libraries, other educational purposes $ 5,811,063 - 2 - Estimated value of food, clothing, etc. contributed by members $ 3,638,353 Miscellaneous $ 1,013,288 $49,484,566 Moreover, the Knights performed the following additional acts of fraternity during 1984: 1,944,920 visits to the sick and bereaved 189,817 blood donors 14,442,413 hours of community service to youth, hospitals, orphanages, church 1,553,224 hours of service to sick or disabled members or families The Knights are an order of Catholic men and their families, dedicated to promoting the ideas of charity, unity, fraternity and patriotism. Supporting the Roman Catholic Church to make certain it remains vigorous and undiminished is one of the primary missions of the Knights. To counter the ongoing decline in the number of candidates for the priesthood and religious life, for example, the Knights provide moral and financial support to individual seminarians and postulants. The Knights serve as a principal sponsor of the International Special Olympics Summer Games, providing financial support, manpower and on-site support. The Games' Founder, - 3 - Eunice Kennedy Shriver said, "I don't think there is any organization in the country that has given as much in personal help and in financial support since we started 19 years ago." From 1955 to 1985 the fraternal and charitable activities of the Knights have increased both in size and in scope. Among other things, the Knights: Created the $10 million "Knights of Columbus Vicarius Christi" fund, earnings from which are conveyed annually to the Holy Father for His personal charitable purposes. In five years this fund has generated more than $6 million for the Pope's good works Bring the Pope to the world at least three times a year by providing the uplink cost to the global satellite Intelsat for the televising of papal ceremonies, especially at Christmas and during Holy Week -- and the downlink in poor mission countries Presented a mobile television production unit to the Vatican Television Center for the taping, recording, and transmission of Vatican ceremonies. Established the million-dollar Count Enrico Galeazzi Fund for the Pontifical North American College for the benefit of the College, U.S. and Canadian Bishops and its priest-students, the Father McGivney Fund for the Collegio Pontificio Filipino and the Our Lady of Guadalupe Fund for the Pontifical Mexican College ... Underwrote completely the renovation of the entire facade of St. Peter's Basilica in Rome, the most famous church in the world, and the statutes of Sts. Peter and Paul in St. Peter's Square Made a $2 million grant for the construction of the chapel in the new headquarters of the National Conference of Catholic Bishops dedicated to Mary, Mother of the Church, and identified as the "Knights' Chapel" in honor of Bishop Greco; and are - 4 - raising $1 million for the Bishop de Laval Fund to help support the work of the Canadian Conference of Catholic Bishops Contributed $250,000 to the National Conference of Catholic Bishops for the Pope's 1987 pastoral journey to the United States, and $100,000 to the program on Catholic education conducted by the National Catholic Educational Association during his visit Erected the Knights Tower and carillon of bells at the National Shrine of the Immaculate Conception and the preservation of the Shrine in perpetuity, and raised a $500,000 memorial fund in honor of Past Supreme Knight Luke E. Hart to promote Marian devotion at the Shrine Provide the entire budget of the National Family Planning offices of the U.S. and Canadian Bishops, assist the NFP office of the Mexican Bishops and donate $150,000 annually, respectively, to the U.S. and Canadian Pro-Life Activities committees Underwrote the construction of the Chapel of Sts. Benedict, Cyril and Methodius, co-patrons of Europe, and the expansion of the Chapel of Our Lady of Czestochowa, both in the grottoes of St. Peter's Basilica, Rome Created the Father Michael J. McGivney Memorial Fund for New Initiatives in Catholic Education in the amount of one million dollars to assure a broadbased improvement in achieving the goals of religious education in the United States and Canada Sponsor the Pope John XXIII Center's seminars for the Bishops in the U.S., Canada, Mexico, Puerto Rico and the Caribbean on the vital topics of life-death issues Underwrite, through an annual assessment, the Order's Catholic Advertising Program which provides free information on the Catholic faith to interested inquirers -- 135,000 inquirers and 10,000 enrollees in correspondence courses annually Have distributed almost two million special Knights of Columbus rosaries at the rate of some 10,000 per month, especially to new members - 5 - Support a multi-million dollar Student Loan Program for members and their children pursuing higher education, with all seminarians eligible. ... Provide support for such varied apostolates as the National Clergy Conference on Alcoholism; Morality-in-Media; the National Catholic Office for Persons with Disabilities; the National Catholic Office for the Deaf; the National Foundation for Mexican-American Vocations; the National Apostolate with Mentally Retarded Persons. Provide $243 million dollars in Church-related mortgages to Catholic dioceses and institutions at low interest rates Renovated St. Mary's Church in New Haven, the birthplace of the Order and entombed the remains of the founder, Rev. Michael J. McGivney, therein on March 29, 1982. Completed the 110-year old construction plan of the Church by erecting a 179- foot steeple, including a carillon of three bronze bells, atop St. Mary's Support the spiritual welfare of armed services personnel and their families around the globe through a $900,000 fund for the Archdiocese for Military Services. Sponsor daily Mass for deceased Brother Knights at St. Mary's Church in New Haven and enable widows of Knights to receive COLUMBIA magazine each month Council Structure As of June 30, 1985, K of C membership stood at 1,417,020, an all time high. Members are organized into 8,185 Councils. The Knights are governed by the Supreme Council, which consists of the supreme officers, the supreme directors (a 21 member body elected for three year terms by the Supreme Council - 6 - at its annual meeting), the past supreme knights, the state deputies, and delegates duly chosen by 61 separate jurisdictions. Executive authority is vested in the supreme officers, who are elected annually by the supreme directors. Charters establishing a subordinate council are granted upon completion of a roster of thirty members or applicants for membership. The presiding officer of the subordinate council is called the grand knight. There are in addition seventeen council officers, twelve of whom are elected to their positions annually by council members, and five of whom are appointed by the grand knight. The officers appoint and supervise committees which are charged with council projects. New members are encouraged to become active in the council by joining one or more committees. A new member is admitted by the Admission Degree. In time, he advances to the Formation Degree, and thereafter may become entitled to wear the emblem of the K of C by entering the Knighthood Degree. The highest order of membership is the Patriotic (or Fourth) Degree. The purpose of the Fourth Degree is to foster the spirit of patriotism. Fourth Degree members serve as honor guards at civic and religious functions. A more detailed description entitled "These Men They Call Knights," is attached as an Exhibit. - 7 - Overview of Fraternal and Benevolent Activities Between 1955 and 1985, the Knights sponsored numerous programs throughout the world for the benefit of the Church, K of C members, and the community. Outlined below are samples of these activities. 1955: A national campaign to place the words "under God" to the Pledge of Allegiance. The Knights of Columbus Foundation - Funds were raised to support a program for the restoration of historic documents at the Vatican library. Anti-Pornography Campaign - A program to oppose pornographic literature and its effect on children and their communities. Italian Welfare Program - The establishment and maintenance of centers in Italy to provide recreation and Catholic education to Italian youth. The K of C correspondence school, offering, at cost, instruction in english, business, foreign languages, civil engineering, and various technical fields. 1965 K of C campaign against pornography, whose activity included the Knights presenting its views in amicus briefs before the Supreme Court. The anti-pornography campaign, which began in the 1950's, continues to this day. Catholic Advertising Program - A campaign begun in 1948 to publicize the tenets of the Catholic Church throughout the world. The K of C deeded land in Rome to the Church on which a Papal audience hall would be erected. - 8 - Scholarship Funds - The K of C awarded scholarships under the Pro Deo and Pro Patria, the Educational Trust Fund, and the Catholic University scholarship and Fellowship programs. President Lyndon B. Johnson commended the Order to its "exemplary charitable works, educational endeavors and worthy civic projects." 1975 The K of C began a new project involving the funding of satellite transmissions of major Vatican ceremonies throughout the world, a project which continues to this day. Beginning in 1971, the "Surge With Service" program encourages local councils to undertake projects of assistance to Church, communities, and to youth. In 1974, almost $11 Million and five million man hours were donated to charitable and benevolent causes. Included were $2.46 Million in donations to needy, sick, disabled and handicapped people; aid to victims of disasters in the amount of $212,000; donations to homes for the aged, hospitals, and youth institutions in the amount of $1.71 Million; donations to civic and welfare projects in the amount of $2.1 Million; and $1.4 Million devoted to youth and juvenile works. The K of C Educational Trust Fund provides a college education to children of members who were killed or permanently and totally disabled in World War II, the Korean War, in Vietnam, or in service with a U.N. peacekeeping force. During the 1970's this program was extended to children of members of the Order who are killed or permanently and totally disabled as a result of criminal violence while functioning as law enforcement officers or as full-time fire fighters. These K of C scholarships include tuition, board and room, books, lab fees, and other incidental expenses at the Catholic college of the student's choice. 1974 figures reflect that K of C members made 434,634 visits to the sick and bereaved, contributed 103,339 donations of blood, devoted 5,111,053 hours of community service to youth, hospitals, orphanages and churches, and 462,903 hours in service to the sick or disabled and their families. The K of C established a fund for a program to reverse the Supreme Court's abortion decision, and to undertake other right to life activities. - 9 - Local councils sponsored sporting, social, patriotic, and various cultural events. 1985 The K of C created a committee in 1983 for the "preservation of the historic sites of the Order," such as St. Mary's Church in New Haven, and the Cardinal Gibbons Memorial in Washington, D.C. The "Surge With Service" program involved over 15 million man hours of community service, 1,944,920 visits to the sick and bereaved, 1,553,224 hours of service to sick and disabled members and their families, and blood donations by 189,817 members, and over $55 Million in charitable contributions, approximately $39.37 per member. K of C funds were used to purchase a new radio transmitter for Radio Veritas in the Phillipines, a radio station devoted to bringing religious broadcasting to the Far East. Numerous community programs were undertaken, such as the collection of approximately 4,000 used toys by Knights Council 6244 in Savannah, Missouri for the "Toys for Tots" Christmas program. At the council home, 425 man-hours were devoted to cleaning and repairing the toys. K of C Council 4913 in Valdosta, Georgia brought the riches of the holiday season to eighteen indigent families in an "Adopt a Family" program. K of C councils provided relief for the famine stricken peoples of Africa. For example, Council 4323 in Blooming Prairie, Minnesota donated $8,000 to ship approximately 79,200 pounds of donated corn to Africa. Traditional scholarships, religious, and educational programs described above continued to form a part of the K of C's fraternal and benevolent works in 1985. LUTHERAN BROTHERHOOD During the period 1955-1985, fraternal expenditures by Lutheran Brotherhood ("LB") increased 9,538% as follows: 1.955 $ 238,181 1965 $ 843,918 1975 $ 4,569,587 1985 $ 22,956,493 Simultaneously, assets grew by 2,911%: 1955 $ 108,128,506 1965 $ 338,614,111 1975 $ 971,195,880 1985 $3,256,106,327 Since its inception in 1917, the official purpose and object of Lutheran Brotherhood, expressed in Article I of its Articles of Incorporation (as amended by the General Convention on May 5, 1979), has been to serve its membership by: Aiding the Lutheran church bodies, their institutions and congregations, Fostering patriotism, loyalty, justice, charity, and benevolence, Providing education and encouragement of the arts, Encouraging industry, saving, thrift, and development on the part of its members, Giving aid in the case of poverty, sickness, accident, or other misfortunes, Owning or operating homes, hospitals, and sanatoria, - 2 - Furnishing protection and issuing benefit contracts, and making payments of benefits, thereon, in case of death or disability by sickness, accident or old age, and otherwise, Promoting the general welfare of its members. The following comparison of Lutheran Brotherhood fraternal programs over the 30 year period 1957 - 1987 demonstrates that LB's fraternal commitment has never been stronger: 1957 $350,000 was allocated for fraternal activities. These funds were used for a variety of programs including scholarships, Lutheran scouting, and branch projects. Through branches, LB distributed $66,000 to youth activities, educational and welfare programs, choirs, religious conferences, mission support, building and repair projects and the purchase of church equipment. LB investments in more than 650 Lutheran church properties reached $187 million in 1957. LB distributed $43,600 to 150 scholarship recipients. 1987 LB provided $31 million for fraternal activities. $3 million went to 11,832 Lutheran congregations. $1.4 million was distributed to 381 Lutheran schools through matching gifts programs (LIFT, IMPACT, Primary Partners). These funds matched 17,970 member gifts. An additional $1.3 million was given to the institutions participating in the matching gifts programs. $3.9 million was distributed to 5,336 fund-raising projects developed and implemented by LB branches. - 3 - $2 million went to 77 Lutheran congregations through the Church Extension program. $1.3 million was distributed to 1,096 students through LB's scholarship programs last year. FRATERNAL STRUCTURE LB members govern Lutheran Brotherhood through delegates elected to a national General Convention. The month to month activities of the Brotherhood are conducted through 719 branches throughout the United States. LB branches bring together three fundamental purposes of the society: the unity and joy of service and sharing; the growing community of Christ's people who are committed to aiding the Lutheran church, the home and the nation through fraternal service activities; and service to the community and the nation. Branches address local needs by making their own decisions about appropriate charitable and fraternal projects, which in part are backed by LB's financial resources. (Exhibit 1.) Examples of LB programs which provide funds for branch use are: - 4 - LB Branch Operating Funds. LB assists the branch with funds for postage and mailing expenses, educational seminars, room rental, food and publicity. The branch decides how the money can best be used. Part of the funds could be spent on the branch's own fraternal activities. Part might be contributed charitably to help resolve the needs of others. Each branch develops its own procedures and guidelines for allocating LB operating funds. LB Branch Challenge Fund. LB encourages and assists branches to undertake service projects otherwise beyond their financial means. Branches may apply to conduct fund-raising efforts matched dollar for dollar by LB. Examples of such projects are: repairing buildings at a Lutheran camp, purchasing furniture for a children's home, buying new equipment for a Lutheran high school, and providing labor and resources to augment environmental and historical preservation projects in local communities. LB Disaster Relief. This program encourages branches to undertake disaster-related service projects by matching branch fund raising efforts on a two dollar for one dollar basis. Qualifying projects are those aiding persons within the U.S. suffering from a one-time natural or medical disaster resulting - 5 - in extensive damage, loss, or destruction. Examples include: a family whose home has been destroyed by fire, victims of a tornado, an individual unable to pay extensive medical bills. Friends in Deed. LB will reimburse a branch for materials and supplies purchased for up to six approved service projects each year. Examples of such projects include: building picnic tables for a camp or park, repairing an elderly person's home, painting school rooms, and building landscape enhancements to parks and recreational areas. Care and Share. LB reimburses branches which distribute items to needy and forgotten recipients in their communities. Examples of care and share projects include: Purchasing clothes, distributing them to a needy family, and visiting with the family. Purchasing toys, taking them to an orphanage, and helping the children unwrap them. Purchasing personal hygiene items, taking them to a shelter, and visiting with the people who live there. Purchasing food, packaging it, and distributing it to needy families. - 6 - AID TO THE LUTHERAN CHURCH The following LB programs are designed to assist the growth and sustenance of the Lutheran church and its related institutions: Congregational Matching Funds. LB enables Lutheran congregations to conduct designated appeals or other efforts to raise funds for projects. The funds raised will be matched by LB dollar-for-dollar up to a stipulated amount. The amount varies according to the number of baptized members in each congregation. Christian Education. LB provides numerous Christian education materials to enhance Sunday school, confirmation, Christian day school and Bible classes. Topics include: "Martin Luther's Seal, "Reformation Window," "Palestine in Third Dimension," "The Christmas Story, "Nativity" "Easter," "Pentecost," and "Noah's Ark," Loans. LB loans money to Lutheran congregations for new construction, building remodeling and refinancing. - 7 - Missions. LB assists national Lutheran church bodies in establishing and sustaining new mission congregations in America. By providing program and interest subsidies for newly formed congregations, LB helps strengthen the growth of the Lutheran church. Baptisms. LB provides newly baptized Lutheran infants with a baptismal medallion to commemorate this holy sacrament. EDUCATION LB provides the following extensive programs to further the education of Lutherans and to strengthen Lutheran educational institutions: LB Four Year and Two Year College/Vo-Tech Scholarships. Available to LB members entering their first year at junior or senior colleges as well as vocational or technical schools. LB Member In-College Scholarships. Available to LB members who are currently undergraduates at a four-year college. LB Lutheran Senior College Scholarships. Available to Lutherans entering their first year at a Lutheran senior college. - 8 - LB Lutheran Junior College Scholarships. Available to Lutherans entering their first year at a Lutheran junior college or Bible school. LB Lutheran Junior College Graduate Award. Available to Lutherans who have been accepted to continue their education at a Lutheran senior college. LB Seminary Award. Available to Lutheran students preparing for a full-time church vocation and attending a Lutheran seminary. LB Seminary Sabbatical Fellowships. Available to Lutheran seminary faculty members and administrators. MD/PhD Scholarships. Available to Lutheran medical students pursuing a joint medical degree and research oriented degree. Guaranteed Student Loans. LB offers guaranteed student loans to members and their dependents. IMPACT. LB encourages members to provide financial support to Lutheran colleges and theological seminaries. LB will match through IMPACT members' gifts of $25-$100 to Lutheran - 9 - institutions of higher education. In 1987, LB contributed $1.1 million to Lutheran institutions through IMPACT to match gifts from 14,434 LB members. LIFT. LIFT is a similar matching-gift program for Lutheran senior high schools. In 1987, Lutheran high schools received $182,000 through the LIFT program. Primary Partners. Through Primary Partners, LB will match members' gift of $25-$100 per year to participating Lutheran pre-schools and elementary schools. In 1987, $145,000 was given to Lutheran elementary schools, matching gifts from 1,519 LB members. LB Foundation Grant Program. The LB Foundation provides funds to allow recipients to attempt innovative projects beyond their normal operational resources. LB identifies a select number of areas for which it will entertain grant proposals and reviews them on an ongoing basis. MENNONITE MUTUAL AID ASSOCIATION During the period 1975-1985, 1/ fraternal expenditures by the Mennonite Mutual Aid Association ("MMAA") increased 705% as follows: 1975 $ 185,290 1985 $1,491,564 Simultaneously, assets grew at a rate of 403%: 1975 $ 9,851,461 1985 $49,570,225 MMAA's Mission Statement explains the society's purposes. Mennonite Mutual Aid is committed to the biblical teachings of stewardship and mutual aid. Our ministry in the church is to contribute to Christian renewal and growth. Mennonite and related denominations and conferences give us direction and guidance. We serve persons, congregations and other groups within these church bodies. We seek to inspire and assist caring and sharing in congregations. We help people provide for themselves and their families. To meet the needs of these groups and persons, we offer education, programs, and services. (See Exhibit 1.) MMAA branches support relief activities sponsored by Mennonite Church agencies. Examples include assisting victims of natural disaster through the Mennonite Disaster Service and 1/ Information prior to 1975 does not exist. - 2 - volunteering time and contributing funds to the Mennonite Central Committee for poor and disadvantaged persons throughout the world. MMAA conducts educational and religious training programs on the Mennonite church's history, faith, and discipleship practices. Examples include a study of the Mennonite experience during World War II and an internship program to reach unchurched youth. FRATERNAL STRUCTURE MMAA members govern the Association by electing the board of directors biannually. MMAA's national office organizes branches to parallel local congregations. The current membership of 61,507 is organized into 562 MMAA branches. The average branch has 109 members. MMAA branches must elect a local secretary, whose duties include keeping a record of branch activities and all branch correspondence. Other branch officers are elected by the members as deemed necessary to carry out the activities of the branch. MMAA branches meet at least monthly. Branch meetings are the forum at which mutual aid programs are planned. In 1985, MMAA expended almost $4.5 Million for charitable activities. - 3 - DIRECT MEMBER ASSISTANCE MMAA provides financial assistance, based on need as determined by the local Mennonite congregation, to help MMAA members cope with special needs. (See Exhibits 2 and 3.) Examples are: Adoption Expenses. MMAA members may receive assistance with adoption related expenses, up to the lesser of 80% of such expenses or $1,500. Covered expenses include attorney fees, court costs, adoption agency fees, and hospital and doctor charges. Burial Expenses. In cases of financial hardship, a grant of up to $2,000 is made for the costs of a casket, burial plot, tombstone, flowers, and other related funeral charges. Catastrophic Aid. MMAA members who suffer financial hardship because of unpaid medical expenses are entitled to receive catastrophic aid grants. There is no maximum limit on the amount of this benefit. Flexible Premium Aid. Members of low income congregations are assisted with medical premiums. - 4 - FOCUS. MMAA will match funds raised by MMAA congregations, up to $1,000 per congregation, for the purpose of assisting members with unmet emergency financial needs of a nonmedical nature. For example, MMAA made. a FOCUS grant in December of 1983 to assist a handicapped teenage boy with the installation of an environmental control center in his home. Congregational Grants. MMAA provides seed money to start projects and funds for mutual aid in Mennonite congregations and communities. SHALOM. The SHALOM (Sharing Health and Leadership on Mutuality) program provides grants to students at Mennonite seminaries to help pay MMAA medical plan costs. SHALOM also supports seminary projects and programs which embody mutual aid and stewardship. Denominational and Inter-Mennonite Grants. These programs provide start-up funds for projects involving mutual aid sharing by Mennonite and Mennonite-related organizations. Examples include a pilot project for nursing help for members within a congregation, and various film/video projects promoting mutual assistance. - 5 - Church Workers Life Premium Aid. This program assists church workers living overseas in high-risk areas in paying insurance premiums. Special Dependent Adults. For as long as needed MMAA will pay 100% of health insurance premiums for members who are mentally or physically unable to earn a living. Wellness. MMAA's commitment to the well being of its members through Christian theology is embodied in the Wellness program, a series of courses providing instruction and consultation for spiritual, mental, and physical well being with Jesus Christ's life as a model for wellness. (See Exhibit 4.) The following comparison provides examples of MMAA fraternal activities during 1975 and 1985: 1975 During the year 1,975 Catastrophic Aid payments of $63,992 were made to help 175 individuals in 28 states pay medical bills. Grants were made to such projects as the Oklahoma Indian Offender Program, the Peace Research Program, the Senior Citizens Committee in Kansas, and the Beatrice Day Care Center. Funding was made possible for inter-Mennonite projects such as a study on aging, and a mental retardation program. - 6 - 1985: Branches assisted victims of natural disaster through the Mennonite Disaster Service. Branch members contributed funds and volunteer man- hours to the Mennonite Central Committee to assist poor and disadvantaged persons in North America and other parts of the world. Educational and religious training programs helped to perpetuate the history, faith, and practices of the Mennonite Church. During 1985, 12 Mennonite congregations and institutions received over $2.5 million in first mortgage loans to build or renovate structures. MMAA helped illegal immigrants in Los Angeles obtain legal status. MODERN WOODMEN OF AMERICA From 1955 to 1985, fraternal expenditures by Modern Woodmen of America increased by 1,254.75% as follows: 1955 $ 469,191 1965 $ 489,135 1975 $1,291,359 1985 $6,356,389 During the same period assets grew by 336.52% as follows: 1955 $194,928,845 1965 $258,848,489 1975 $359,828,629 1985 $850,908,122 The Modern Woodmen's fraternal programs and community activities are designed to: Bring together persons of exemplary habits and good moral character into a Fraternal Benefit Society and thereby provide for the social, intellectual, moral, and physical improvement of its members. Promote fraternal relationships and foster acts of fraternity, charity, and benevolence by and among members. Encourage and strengthen the concept of the conventional and traditional family unit. Assist members to live in harmony with their environment. - 2 - Modern Woodmen has increased fraternal programs steadily to fulfill its objectives and to respond to member and community needs. Attached as Exhibits 1-4 are copies of Modern Woodmen magazine for 1955, 1965, 1975, and 1985. These Exhibits as well as others enclosed provide a sample of Modern Woodmen's fraternal and charitable activities since 1955. Today Modern Woodmen offers an expanded list of fraternal support for members including Family Helpline, Orphan Benefits, College and Vocational Scholarships, Newborn Benefits, Medic Alert, and Fraternal Aid. The Camp System Modern Woodmen conduct fraternal and community programs through "camps". In 1985 there were 1,093 camps dedicating 320,848 hours of volunteer time in acts of fraternal and benevolent service. (Exhibit No. 5.) Each camp has its own local governing body. (Exhibit 6, pages 1-5.) A Consul presides over all camp meetings and calls special meetings. Consul duties include appointing committees, judging elections, appointing officers and promoting camp activities. The Adviser fills in for the Consul and assumes the office of Consul if it becomes vacant. The camp Secretary presents plans for fraternal and community programs and is responsible for activity and membership records. - 3 - The Banker acts as the camp's financial officer and pays all authorized bills, assists the Secretary with financial reports, and maintains the camp's general funds. The Escort, Watchman and Sentry serve the camp as directed by the Consul. In some camps, these three officers comprise the Board of Trustees. The officers discuss social, community and community programs at regular monthly meetings. Social and Community Activities with Modern Woodmen's financial and managerial assistance, each camp develops a variety of social and community service activities. (See Exhibit 6, pages 9-18.) Modern Woodmen encourages every camp to sponsor a Family Life Activity Program each year, including dinners and picnics as well as speakers. Clergymen, family counselors, family court judges, psychiatrists, social workers, or teachers are invited to talk on family life. Typical Family Life topics are: "Parent-Child Communications," "Discipline with Love," "The Family that Plays Together Stays Together," and "A Child's Early Years." Another example is Modern Woodmen's home safety program. These programs demonstrate to camp members how to minimize fire hazards, install smoke detectors, and develop a fire escape plan. (Exhibit 6, page 13.) - 4 - Modern Woodmen encourages local camps to conduct social programs at nursing homes or shelter care homes, visit children in local hospitals, plant trees and shrubs in city parks or around community buildings, clean up community parks, give holiday food baskets to needy families, and do home maintenance and repairs for the elderly. (Exhibit 6, page 18.) A Community Service Recognition Program gives each camp the opportunity to honor an individual for outstanding community service. Examples include a special education teacher who conducts day camps for handicapped children; a doctor who works with cancer patients; a school guidance counselor; a minister celebrating the 55th anniversary of his ordination; and a doctor who organized a community health program. (Exhibit 6, page 16.) Matching Funds Modern Woodmen provides matching funds so that each camp may conduct a successful community project each year. Through this program a camp can raise money in its own area for specific local needs with the financial support of Modern Woodmen. (Exhibit 6, page 17.) In 1987, Modern Woodmen Matching Fund Projects contributed 1.7 million dollars to benefit local communities. The following are typical examples: is - 5 - Providing equipment for a Minnsota high school; installing heating and air-conditioning in a Tennessee community center; helping to fund a volunteer fire department in Kentucky; equipping a senior citizens' retirement home in South Dakota; equipping a room for children's play therapy and counseling in an Illinois shelter for abused women and children; renovating a public swimming pool in Nebraska; financial assistance to a Kansas family with a two year old child afflicted with cancer; upgrading a Vermont library. Junior Service Clubs and Teen Clubs Modern Woodmen gives special emphasis to youth. Hundreds of Junior Service Clubs and Teen Clubs provide children and their families with monthly social, civic, educational and fraternal activities intended to combat juvenile delinquency, teach safety, promote patriotism, encourage environmental concern and stimulate interest in education. The Junior Service Clubs and Teen Clubs sponsor civic speaking contests, bicycle safety programs, youth community parties, and ecology programs. (See Exhibits 7 and 8.) An overview of youth activities for 1955 and 1965 are attached as Exhibits 9 and 10. - 6 - Modern Woodmen's youth programs encourage children to serve their community. Awards are presented for the number of hours dedicated to community service. Examples include providing wheelchairs and crutches to those in need, and participation in Modern Woodmen's "Adopt a Grandparent" program. Family Helpline Modern Woodmen provides members and their families with a full time professional counseling program to assist with marital, legal, health, family, alcohol and drug problems. (See Exhibit 11.) Operation of Family Helpline costs Modern Woodmen approximately $35,000 per month. Scholarships Modern Woodmen awards 48 fraternal scholarships each year. Thirty six are for college education and the remaining 12 are for vocational/technical training. The scholarships are renewable and applications are judged by an independent scholarship selection committee. As of December 31, 1985 Modern Woodmen had awarded $1,257,800 in scholarships. (Exhibit 12, page 39.) By December 31, 1987, Modern Woodmen had awarded $1,597,595 in scholarships. - 7 - Orphan Benefits Through this benefit a child's guardian receives monthly payments from Modern Woodmen to assist in the care, maintenance and education of junior members and minor children of members who are orphans. Orphans are also eligible for a $12,000 college scholarship. Through 1985, Modern Woodmen had paid $876,135 in Orphan Benefits. (Exhibit 12, page 38.) By December 31, 1987 payments had increased to $1,021,325. (Exhibit 13, page 37.) Fraternal Aid Fund Modern Woodmen maintains a Fraternal Aid Fund to assist members who are temporarily in need of financial assistance as a result of flood, earthquake, tornado, hardship or disability. (Exhibit 6, page 24.) New Born Benefits New Born Benefits are paid to parents of a child that lives five full days but less than 60 days. The New Born Benefit also provides new born children with insurance regardless of health. (Exhibit 6, page 25.) - 8 - Medical Information Service A Medical Information Service provides members with health information publications on smoking, cancer, drugs, alcohol, and other health matters. In 1985 there were 6,318 requests for Modern Woodmen's medical publications. (Exhibit 12, page 39.) In 1987 9,366 requests were received. (Exhibit 13, page 39.) Medic Alert Modern Woodmen members may register, at no cost, in a Medic Alert system which provides information on medical conditions that must be known to physicians or others administering emergency medical treatment. A participating member receives an identification bracelet with a registration number and the member's medical problem engraved on it. Emergency medical technicians may obtain information on the patient's health condition by calling the emergency number on the bracelet. (Exhibit 6, page 23.) WOODMEN OF THE WORLD During the period 1955-1985, fraternal expenditures by Woodmen of the World ("Woodmen" or "WOW") increased 629.60% as follows: 1955 $ 860,200 1965 $1,620,340 1975 $2,453,923 1985 $6,276,013 Simultaneously, assets grew at a rate of 554.08%: 1955 $ 201,879,992 1965 $ 334,496,306 1975 $ 491,241,547 1985 $1,320,465,232 OBJECTIVES The Society's objectives are stated in the preamble to its Constitution: Woodcraft is to ennoble its membership; to minister to the afflicted; to relieve distress; to seek employment for those without it; to cast a sheltering arm about the defenseless living; to give honorable burial to our sacred dead; to so impress the grand doctrine of the brotherhood of man upon our membership as to make it an important factor in our daily lives; to encourage broad, charitable views; to make us more intelligent citizens, truer friends, gentler sons and - 2 - daughters, more thoughtful brothers and sisters, more considerate husbands and wives and more reasonable parents. It is not an asylum for the indolent or those without self-esteem. It is for mutual benefit when misfortune assails us. It is for substantial aid to our loved ones when we are gone. It is for the entertainment of our families and friends in social sessions, thus more firmly to weld the fraternal bonds which so pleasantly unite us, and finally it is to build a progressive and permanent institution, which shall prove a valiant knight in the defense of home and country through the coming ages. LODGE SYSTEM The Woodmen accomplish their fraternal, charitable, and patriotic goals through a network of 3,318 local lodges. The lodges meet monthly and have an average of 239 members. New lodges are formed when 20 persons are available for membership. Twelve members of WOW then petition the National Secretary for a new charter. Each month WOW members receive the Woodmen Life Magazine (Exhibit 2). The officers of the lodge include President, Past President, Vice President, Secretary, Treasury, Trustees, Escort, Watchman, Sentry and Musician. All officers are elected except for the Lodge Secretary who is appointed by the President of the Society. 1/ Exhibit 1, P. iv. - 3 - The subordinate bodies of the Society consist of Jurisdictions, Camps, Courts, Groves, and Youth Lodges. Camps or Groves are composed of members who have attained the age of sixteen. Courts are composed of female members who have attained the age of sixteen years. Youth Lodges are composed of members of the Society who have not attained the age of sixteen. State managers supervise local lodge activities. GOVERNANCE Local lodges are ultimately responsible for choosing WOW leaders. The Supreme Governing body is the National Convention. The National Convention has original and appellate jurisdiction in all matters pertaining to the Society and its general welfare. It has the power to enact laws for its own government, the government and management of the Society in general, and all subordinate bodies. Delegates to the National Convention are elected by jurisdictional conventions. Special powers of the National Convention include: election of officers and directors of the Society, changes in the Constitution and Laws, and general oversight of all the Society's interests. The National Convention elects members of a Board of Directors. Officers and Trustees are elected by delegates to the National Convention. Each of the Officers and Trustees also serves as a Director. - 4 - Jurisdictions are intermediate assemblies. Each jurisdiction is one, or a combination of several, states. The jurisdictional conventions meet biannually. Delegates are elected from local lodges within each jurisdiction. The number of delegates from each lodge is based upon membership. WOODMEN CARE The Society's fraternal tenets, exemplified in Woodcraft's ritualistic ceremonies, teach brotherly love, mutual sympathy and understanding, and good citizenship. In times of need and misfortune, fellow Woodmen bring aid, comfort and encouragement to each other. Local lodges also perform thousands of civic services in their communities each year. Special fraternal and social programs provide wholesome entertainment and inspiration for Woodmen to their families and foster firm, lifelong friendships. There are two sides to WOW'S structure -- the Protective and the Fraternal. Because WOW cares about its membership and its responsibility in the local community it offers Woodmen Care benefits to all members and local lodges. These package benefits enable lodges to extend their own "care" to Woodmen families and to other individuals and organizations in their communities (Exhibit 3). - 5 - FRATERNAL SERVICE FUND WOW'S Fraternal Service Fund is designated to be used specifically in the promotion of fraternal, civic and patriotic service. WOW's Executive Vice President manages the Service Fund with the assistance of national officers appointed by the President. These individuals comprise the Fraternal Service Fund Committee. Projects and activities supported by the Fund are approved by another group of sovereigns called the National Fraternal Committee. This committee is composed of 12 lay members from throughout the nation who are appointed by the President for two-year terms and are among the outstanding Woodmen in the country. Various fraternal projects made possible through WOW's Fraternal Service Fund are sponsored and carried out by local adult lodges under the direction of WOW state managers. WOW projects promote good will in local communities. The following are examples: U.S. Flags. WOW presents U.S. and religious flags to worthy organizations such as Scout Troops, 4-H clubs, and schools. WOW is the largest private purchaser of U.S. flags. - 6 - American Patriot's Handbook. WOW provides Patriot's Handbooks to school libraries, newly naturalized citizens, and persons studying to become citizens. Books. WOW provides books with bookplates to libraries in memory of deceased members. The objectives of WOW are printed on each bookplate. Compasses. WOW presents compasses to Boy Scout leaders. Honor, Conservation and Lifesaver Commendation Awards. WOW presents honor, conservation and lifesaver commendation awards to deserving persons. Mr. Woodmen and Woman of Woodcraft Plaques. WOW presents plaques in recognition of members most active and helpful to the lodge. Lodge President Citations. WOW presents a special citation to lodge presidents in recognition of fraternal service. Safe Driver Pins and Recognition Cards. WOW presents pins and cards to school bus drivers who have driven one or more years without an accident. - 7 - History Awards. WOW presents history awards to outstanding high school and grade school students in American history. The awards are placed on display in the student's school. Permanent Record History Plaque. WOW presents plaques to schools that participate in the WOW history trophy program to record the names of trophy winners. Grave Markers. WOW places grave markers on the graves of members. Funeral Banners. WOW provides a funeral banner to signify a deceased person was a Woodman. Fraternal Allowance. WOW provides a fraternal allowance to new adult lodges to assist in implementing fraternal and charitable programs. Scrapbook Contests. Local WOW lodges sponsor scrapbook activities. Contests are held at jurisdictional conventions and a first place cup is awarded to winners. Disaster Relief. Qualified members suffering hardship as a result of hurricanes, storms or floods qualify for Woodmen disaster relief: Payments for Woodmen families who were victims of natural disasters totaled $136,194 in 1985. - 8 - Wheel Chair Program. WOW provides wheel chairs, walkers, canes and crutches to individuals in need. Matching Funds, Civic and Needy Member Projects. WOW provides matching funds to local lodges to assist in community programs. The following projects are part of the WOW's matching fund and civic activity programs: Recreational activities for groups of senior citizens and athletic teams. Christmas projects of food baskets, small articles of clothing, and Christmas parties for orphans or needy children. Assistance to needy members. Equipment for rescue squads and volunteer fire departments. Equipment for parks and community centers. State flags for public buildings. School bus shelters. Flagpoles at public buildings or on public grounds. Equipment for medical institutions. Equipment for handicapped persons. Furnishings or equipment for orphanages and homes for the elderly. Furnishings and equipment for public libraries. Equipment for schools such as maps, reference books, laboratory equipment, and various other teaching aids. Outdoor equipment for the community, such as bulletin boards, trash receptacles, etc. Equipment for historical museums. - 9 - Lodge Aid. WOW provides funds on a 50/50 matching basis to improve lodge halls. The Society also provides loans to Woodmen lodges at 6% interest to enable them to build lodge halls. In 1987, nine lodge halls received $253,000. Outstanding loans as of December 31, 1987 totaled $2,682,570. Youth Program. WOW's National Youth Program provides guidance. and information for year-round youth activities including a comprehensive summer camping program. WOW has special youth lodges. Young members are known as Woodmen Rangers. WOW publishes Timberlines Magazine especially for Rangers. (Exhibit 4). The goals of the Youth Program are character development, physical fitness, self determination, and leadership experience. The WOW youth program provides opportunities for young people to gain confidence in themselves, strengthen integrity, develop independence, show thoughtfulness towards others, and be good citizens. WOW presents awards to youth members to encourage personal growth. WOW sponsors free summer camps for active members of its youth lodges. These camps allow members from many youth lodges to meet, and to engage in outdoor and craft activities. In 1987, 11,926 youth members attended such camps. - 10 - The Society also loans funds to enable the lodges in the various states, acting jointly, to acquire or construct facilities for the summer youth camp program. In 1987, two such loans were granted totaling $400,000 and at the end of 1987, the unpaid balance on such loans was $2,028,921. Uniform Rank and Drill Teams. Local lodges encourage introduction of new members through use of ritualistic ceremonies and a drill team company. The Uniform Rank program includes a state competition for qualified Uniform Rank teams. State competitions are held each year when there are four or more qualified teams. A Uniform Rank Company must have 12 members and a captain, plus two alternates -- a total of fifteen. The Degree Team is the Company plus the five principal lodge officers. Judges for all state competitions are assigned by the state manager, and all competition is judged in accordance with the Society's Official Ritual and Drill Instructions for Lodges with Drill Teams. (Exhibit 5). Orphan Benefit. The Woodmen Orphan Benefit Program provides monthly grants for the care and education of the orphan children of members. For children under five the program pays $100 a month. A child between 6-15 receives $125 a month and children 16-18 receive $165 per month. Under this program children may also receive up to $10,980 for their college education. In 1987 - 11 - the program served 25 orphans. Since the inception of the program in 1975, 71 orphans have been assisted at a cost of $506,415 through 1987. WOODMEN CARE HEALTH PROGRAM Health assistance to members and dependents is one of the major fraternal benefits offered by Woodmen. The Fraternal Medical Program has shown steady growth over the years. Major health care benefits are: Tuberculosis Benefit. The maximum benefit available is $3,000. Since the beginning of the tuberculosis program in 1923, 7,854 members have been treated and fraternal assistance has amounted to $6,468,901.68. Lung Cancer Benefit. The maximum benefit is $1,000. The program started in 1959. Over 5,500 members have been assisted and in 1987 WOW paid $429,524.59 for the program. Brain Tumor Benefit. The maximum benefit is $1,000. Since 1973 Woodmen have assisted 861 brain tumor victims. In 1987 WOW expended $73,028.17 for this program. - 12 - Leukemia and Hodgkin's Disease Benefit. The maximum benefit is $1,000. Since 1973 the program has assisted over 800 leukemia and hodgkin's diseases victims. In 1987 WOW expended $58,900.46 for this program. Malignant Lymphoma Benefit. The program started on January 1, 1979. Over 350 lymphoma victims have been assisted. In 1987 WOW expended $60,672.13 for this program. Multiple Myeloma Benefit. 131 multiple myeloma patients have been aided by Woodmen since 1979. In 1987 WOW expended $22,999.92 for this program. OVERVIEW OF WOW LODGE ACTIVITIES, 1955-1985 The attached Exhibits and materials submitted to Treasury contain extensive examples of WOW'S fraternal activities. Outlined below are samples of these activities over the 30 year period in question. We have also attached as Exhibit 6 newspaper clippings containing additional examples of WOW'S charitable, community and fraternal activities in the years 1985-1988. - 13 - 1955 Exhibit 7. 2,392 flags presented to schools, community buildings, churches, parks, playgrounds, Boy and Girl Scout Troops, 4-H Clubs, F.A.A. branches, etc. 634 gold medals awarded for proficiency in American history in high schools. 310 recognition certificates awarded to grade school, students for proficiency in American history. 1,352 American Patriot's Handbooks given to newly naturalized citizens, teachers, grade school history students, etc. 584 Compasses given to Scoutmasters. 482 key ring knives presented to Den Mothers of Cub Scout Packs. 29 wrist watches furnished for most cooperative boy in state training schools. 82 Honor Plaques awarded to persons performing outstanding civic service and acts of heroism. 51 Conservation Plaques presented to persons giving high order of service in field of conservation. 7,659 Safe Driver Awards presented to worthy school bus drivers. 2,843 nail clippers presented to men being inducted into military service. 17 "Woodmen Trees" planted by local Camps. 3 historical markers dedicated: General John J. Pershing, California Stephen Russell Mallory, Florida First Two Free Schools, Virginia 545 "Mr. Woodman of 1954" plaques presented. 29 grave markers erected at unmarked graves. 199 WOW monuments cleaned and straightened when needed. 5 hospital rooms furnished by a local lodge. 1 hospital given laboratory equipment. 8 wheel chairs furnished for community use. 4 hospital beds made available for community use. 2 laryngoscopes given to rescue squad. 1 air-pack donated for fire department. 2 boats and trailer furnished for rescue squads. 1 oxygen tent contributed for community use. 3 community swimming pools constructed. 42 community and recreation centers and city parks given equipment. a shetland pony and saddle given to a crippled boy. Community church and a nursery provided with equipment. 16 Boy Scout and Girl Scout Troops given equipment, such as tents, cooking facilities, rifle range, cameras. 30 playgrounds given equipment. 1 school activity bus furnished. 12 high school bands given band equipment and uniforms. - 14 - 25 athletic teams, Boys' Camps and Boys' Clubs furnished athletic equipment. 19 unfortunate members were given financial assistance. families. 20 Christmas programs carried out for underprivileged 1985: Exhibit 8. 15,715 flags presented to schools, community buildings, churches, parks. 2,611 trophies awarded for proficiency in American history in high schools. 2,260 history plaques awarded to grade school students proficient in American history. 3,699 American Patriot's Handbooks given to newly naturalized citizens, teachers, libraries, etc. 2,859 compasses given to Scoutmasters. 162 honor plaques presented to persons performing outstanding civic service. 78 conservation plaques presented to persons giving high order of service in the field of conservation. 20 grave markers provided for unmarked graves. 156 wheelchairs provided to local lodges for community use. 77 crutches provided to local lodges for community use. 98 canes provided to local lodges. 72 walkers provided to local lodges for community use. 277 pieces of equipment provided for fire fighters and rescue squads. drivers. 9,264 safe-driver pins awarded to worthy school bus Furnished and equipped 61 community centers. Assisted and equipped 29 centers for mentally retarded and handicapped persons. Provided equipment for 11 medical centers. Provided equipment for 29 schools. Equipment given to 29 orphanages and homes for aged. Provided equipment for 9 centers for senior citizens. Provided 6 pieces of playground equipment. Assistance and equipment given to 43 health and welfare agencies. Provided 15 scholarships and aid for students. Conducted 155 Statute of Liberty renovation projects. Conducted 225 Christmas projects for the unfortunate. Assisted 49 needy members. 185 lodges received funds for youth camps. LAW OFFICES ZUCKERT, SCOUTT, RASENBERGER & JOHNSON BRAWNER BUILDING COATES LEAR (1915-1963) 888 SEVENTEENTH STREET, N. W. EUGENE M. ZUCKERT OF COUNSEL JERROLD SCOUTT. JR. RAYMOND J. RASENBERGER WASHINGTON, D. C. 20006-3959 LINWOOD HOLTON THEODORE W. ROSENAK R. TENNEY JOHNSON MICHAEL DOWNEY RICE LAWRENCE C. MERTHAN TELEPHONE: (202) 298-8660 C. WESTBROOK MURPHY MARVIN S. LIEBERMAN FRANK J. COSTELLO TELECOPIER: (202) 342-0683 EDGAR T. BELLINGER RALPH L. KISSICK CABLE: ZSRLAW JAMES L. DEVALL JOHN T. STEWART. JR." WALTER DARNALL VINYARD. JR. TELEX: 89648 WILLIAM H. CALLAWAY. JR. RACHEL B. TRINDER CHARLES J. SIMPSON. JR. MONIQUE E. YINGLING RICHARD A. ALLEN ELENA W. KING MALCOLM L. BENGE JAMES A. HARRIS JAYME 1. RIZZOLO GIGI B. SOHN' ANITA MOSNER LARSCHAN CHRISTA VAN ANH VECCHI" "NOT ADMITTED IN D.C. April 3, 1987 Mr. Michael J. Kaufman Office of Tax Analysis U.S. Department of the Treasury Room 4048 15th Street at Pennsylvania Avenue, N.W. Washington, D.C. 20220 Dear Mike: In response to your request I enclose a history of the unique and specific federal tax exemption for fraternal beneficiary societies as well as a complete set of all relevant source documents. We hope this will be helpful as Treasury prepares to study fraternal beneficiary societies in accordance with the requirement of the Tax Reform Act of 1986. We appreciate your courtesy and cooperativeness. I am available at any time to answer questions or to provide you with any further information. With best personal regards, Sincerely Water yours, WDV Enclosure HISTORY OF THE UNIQUE AND SPECIFIC FEDERAL TAX EXEMPTION FOR FRATERNAL BENEFICIARY SOCIETIES Walter D. Vinyard, Jr. James A. Harris Evan M. Migdail Zuckert, Scoutt, Rasenberger s Johnson 888 Seventeenth Street, N.W. Washington, D.C. 20006 April 3, 1987 ZUCKERT. SCOUTT. RASENBERGER & JOHNSON HISTORY OF THE UNIQUE AND SPECIFIC FEDERAL TAX EXEMPTION FOR FRATERNAL BENEFICIARY SOCIETIES TABLE OF CONTENTS I. BACKGROUND i A. What is a fraternal beneficiary society? 1 B. A specific federal tax exemption for fraternals has existed virtually without change for 93 years 2 1. Statutory provisions 2 2. Legislative history 5 3. Income tax regulations 7 4. Cases and rulings 8 a. Lodge system 8 b. Insurance 10 C. Membership 11 d. Permissible forms of benefits 14 II. THE FRATERNAL EXEMPTION SHOULD BE RETAINED 18 A. The requirements of present law for exemption as a fraternal are adequate 18 B. Fraternals are unique 19 C. Fraternals continue to carry out their historic exempt purposes 2: D. Tax exemption does not give fraternals an unfair competitive advantage 21 - i - ZUCKERT. SCOUTT, RASENBERGER & JOHNSON ATTACHMENTS A Tariff Tax Act of 1894 B Pollock V. Farmers' Loan and Trust Co., 158 U.S. 601 (1895) C Tariff Act of 1909 D Income Tax Act of 1913 E Revenue Act of 1916 F Revenue Act of 1918 G Revenue Act of 1921 H Revenue Act of 1924 I Revenue Act of 1928 J Revenue Act of 1932 K Revenue Act of 1934 L Revenue Act of 1936 M Internal Revenue Code of 1939 N Internal Revenue Code of 1954 O Internal Revenue Code of 1986 P H. Rep. No. 350, 67th Cong., 1st Sess. 13 (1921) Q H. Conf. Rep. No. 486, 67th Cong., 1st Sess. 32 (1921) R 44 Cong. Rec. at 3937-38 (June 29, 1909) S 44 Cong. Rec. at 3981 (June 30, 1909) T 44 Cong. Rec. at 4063 (July 2, 1909) U Regulations 33, Art. 68 (1916 and 1917 Acts) V Income Tax Reg. § 1.501 (c) (8)-1 (a) - ii - ZUCKERT. SCOUTT., RASENBERGER & JOHNSON W Rev. Rul. 55-495, 1955-2 C.B. 259 X Rev. Rul. 63-190, 1963-2 C.B. 212 Y Western Funeral Benefit Association V. Hellmich, 2 F.2d 367 (E.D. Mo. 1924) Z Fraternal Order of Civitans V. Commissioner, 19 T.C. 240 (1952) AA G.C.M 34607 (September 13, 1971) BB O.D. 690, 3 C.B. 236 (1920) CC I.T. 1516, I-2 C.B. 180 (1922) DD Rev. Rul. 73-165, 1973-1 C.B. 224 EE Polish Army Veterans Post 247 V. Commissioner, 24 T.C. 891 (1955), aff'd, 236 F.2d 509 (3rd Cir. 1956) FF Rev. Rul. 64-194, 1964-2 C.B. 149 GG Commercial Travelers Life and Accident Association V. Rodway, 235 Fed. 370 (N.D. Ohio 1913) HH National Union V. Marlow, 74 Fed. 775 (8th Cir. 1896) II Philadelphia and Reading Relief Association V. Commissioner, 4 B.T.A. 713 (1926) JJ Hip Sing Association V. Commissioner, T.C. Memo 82-203 (1982) KK GCM 38192 (December 7, 1979) LL Rev. Rul. 84-49, 1984-1 C.B. 134 MM G.C.M. 38312 (March 20, 1980) NN G.C.M. 39575 (November 18, 1986) 00 Grange Insurance Association of California V. Commissioner. 37 T.C. 582 (1961), rev'g, 317 F.2d 222 (9th Cir. 1963) PP G.C.M. 35639 (January 28, 1974) - iii - ZUCKERT. SCOUTT. RASENBERGER & JOHNSON HISTORY OF THE UNIQUE AND SPECIFIC FEDERAL TAX EXEMPTION FOR FRATERNAL BENEFICIARY SOCIETIES I. BACKGROUND A. What is a fraternal beneficiary society? A fraternal beneficiary society ("fraternal") is a non- profit mutual aid organization which: (1) insures members and their families against death, disease and disability, and (2) maintains an active lodge system. The lodge system constitutes one of the most powerful forces for good in the United States today. In recognition of this, IWC large fraternals were awarded the President's Volunteer Action Award by President Reagan in 1985 and 1986 for mobilization c 5 volunteers. The mutual aid concept encompasses both the insuring of members and their families as well as the volunteer, social, religious, patriotic, educational, charitable and benevolent activities of 43,491 lodges throughout the nation. Frequently lodge members reach out to help other people in their communities when they are in need. Fraternal lodges also help address general community problems such as drug abuse. During 1985 ZUCKERT. SCOUTT, RÄSENBERGER & JOHNSON 10,000,000 lodge members in the United States devoted 26,834,387 volunteer hours in the performance of 6,953,095 acts of fraternal service. Fraternal benefit societies maintain and support orphanages, homes for the aged, and other humanitarian institutions. They provide welfare services for the destitute and indigent. They give material and financial assistance to the stricken and homeless at times of disaster. They provide the volunteer support to help many community charitable projects succeed. They work directly with the mentally retarded, the blind, and the handicapped. During 1985 fraternals expended $242,438,746.00 to maintain the lodge system and its many volunteer, charitable, educational, patriotic and religious activities. B. A specific federal tax exemption for fraternals has existed virtually without change for 93 years 1. Statutory provisions A specific federal tax exemption limited solely to fraternals has appeared in every federal income tax law and Internal Revenue Code enacted since the Tariff Tax Act of 1894.- That statute imposed a two percent tax upon the net income of 1/ 28 Stat. 509 (1894) See Attachment A. The Tariff Act of 1894 was ruled unconstitutional in Pollock V. Farmers' Loan and Trust Co., 158 U.S. 601 (1895), Attachment B. - 2 - ZUCKERT. SCOUTT. RASENBERGER & JOHNSON " marine, life, and other insurance companies and all other corporations, companies, or associations doing business for profit in the United States, no matter how created and organized "2/ The 1894 law included the following specific exemption for: [F] raternal beneficiary societies, orders, or associations operating under the lodge system and providing for the payment of life, sick, accident, and other benefits to the members of such societies, orders, or associations and dependents of such members. This exemption was carried forward without change into the Tariff Act of 1909.4/ Congress incorporated the exemption into the Income Tax Act of 1913 with a minor change extending the exemption to cover companies that exclusively provide insurance to members of a fraternal organization that operates under a lodge system but that do not themselves operate under the lodge system. The exemption was incorporated in the Revenue Act of 1916 with one modification, a change from the language "and other benefits" to "or other benefits." 6/ 2/ Id., S 32. 3/ Ibid. 4/ 36 Stat. 11, 113, Attachment C. 5/ 38 Stat. 114, 172, Attachment D. 6/ 39 Stat. 756, 766, Attachment E. - 3 - ZUCKERT. SCOUTT. RASENBERGER & OHNSON Since 1916, the exemption has been reenacted by Congress without significant change. The current language appears in § 501 (c) (8) of the Internal Revenue Code of 1986 and provides exemption for: Fraternal beneficiary societies, orders, or associations- (A) operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and (B) providing for the payment of life, sick, accident, or other benefits to the members of such society, order, or association, or their dependents. 8/ Congress has always made the provision of insurance to members as a requirement for exemption as a fraternal. In its version of the bill that became the Revenue Act of 1921,9/ the House proposed to drop the insurance requirement for fraternals. 10/ The Senate amendment to which the House receded, 7/ Revenue Act of 1918, 40 Stat. 1057, 1076 (Attachment F); Revenue Act of 1921, 42 Stat. 227, 253 (Attachment G); Revenue Act of 1924, 43 Stat. 253, 282 (Attachment H) ; Revenue Act of 1928, 45 Stat 791, 812 (Attachment I); Revenue Act of 1932, 47 Stat. 169, 193 (Attachment J) : Revenue Act of 1934, 48 Stat. 680, 700 (Attachment K); Revenue Act of 1936, 49 Stat. 1648, 1673-74 (Attachment L); Internal Revenue Code of 1939, Sec. 101(3), 53 Stat. (Part 1) 1, 33 (Attachment M); Internal Revenue Code of 1954, Sec. 501(c)(8), 68A Stat. 3, 163-164 (Attachment N) 8/ Internal Revenue Code § 501 (c) (8) (hereafter "Code"), Attachment O. 9/ 42 Stat. 227, Attachment G. 10/ H. Rep. No. 350, 67th Cong., 1st Sess. 13 (1921), Attachment P. - 4 - ZUCKERT. SCOUTT. RASENBERGER & JOHNSON "restore[ [d] the language of existing law omitted from the House bill, granting exemption of such societies only if they provide for the payment of benefits to the members of such societies or their dependents. "11/ 2. Legislative history Legislative history pertaining to the fraternal exemption is meager because its need has never been questioned. There is no surviving legislative history of the 1894 Act other than the statute itself. On its face, however, the statute is unambiguous. Congress taxed "for profit" life and nonlife insurance companies no matter how created or organized, but specifically exempted fraternals from tax. The fraternal exemption covered the provision of "life, sick, accident and other benefits" to members and dependents. In 1909 Congress debated whether application of the proposed corporate income tax to "every corporation, joint-stock company, or association, organized for profit and having capital stock represented by shares, and every insurance company, how or hereafter organized under the laws of the United States or of any State or Territory of the United States" would subject fraternals to tax. 12/ This floor debate preceded amendment of the bill = 11/ H. Conf. Rep. No. 486, 67th Cong., 1st Sess. 32 (1921), Attachment Q. 12/ See, 44 Cong. Rec. at 3937-3938 (June 29, 1909), Attachment R. - 5 - ZUCKERT. SCOUTT. RASENBERGER & JOHNSON include an express exemption for fraternals. The Senators who debated the issue were concerned that without an express exemption the language quoted above would tax fraternals as insurers. Senator McCumber took the view the tax would not cover fraternals, because it applied only to corporations "organized for profit and having capital stock represented by shares. "13/ Senator Cummins pointed out that the language applied the tax without limitation to "all insurance companies. "14/ The debate was inconclusive over whether fraternals would be taxed as insurers without an exemption. Senator Flint opined that fraternals were not subject to tax because "insurance is a mere incident to the purpose of the organization. 15/ This point of view, however, did not prevail. Senator Cummins believed the appellation "insurance companies" could include fraternals without a specific exemption: I could mention a hundred in our State alone, without any capital stock, that are as purely mutual and fraternal as the Order of Railway Conductors or the Modern Woodmen. You will find when we have gone into this subject that the appellation "insurance companies" will cover a very great number of organizations engaged in this business. 16/ 13/ Id. at 3937. 14/ Ibid. 15/ Ibid. 16/ Id. at 3938. - 6 - ZUCKERT. SCOUTT. RASENBERGER & JOHNSON In further debate the next day, Senator Cummins reiterated "I have no doubt the Modern Woodmen of American would be held to be an insurance company. 17/ To prevent this result, the Senate adopted an amendment exempting fraternals two days later. 18/ This legislative history demonstrates that Congress recognized the importance and uniqueness of fraternal insurance in 1909. Congress exempted fraternals specifically SO they would not be taxable as insurance companies. The statutory exemption has always required that a fraternal insure its members. 3. Income tax regulations Income Tax Regulations pertaining to the fraternal exemption have focused on internal structure. The original regulations provided that fraternals must be organized under a charter, have properly elected officers, operate with an adopted ritual or ceremony and hold meetings at stated intervals. 19/ Current regulations contain language virtually unchanged from the regulations promulgated under the Revenue Act of 1918: A fraternal beneficiary society is exempt from tax only if operated under the "lodge system" or for the exclusive benefit of the members so operating. "Operating under the lodge system" means carrying on its activities under a form of organization that comprises local branches, chartered by a parent organization and largely self-governing, called lodges, chapters or the like. In order to be 17/ 44 Cong. Reg. at 3981 (June 30, 1909), Attachment S. 18/ 44 Cong. Rec. at 4063 (July 2, 1909), Attachment T. 19/ Regulations 33, Art. 68 (1916 and 1917 Acts), Attachment U. - 7 - ZUCKERT. SCOUTT. RASENBERGER & JOHNSON exempt it is also necessary that the society have an established system for the payment to its members or their dependents of life, sick, accident, or other benefits. 20/ 4. Cases and rulings The courts and the Internal Revenue Service have strictly enforced the statutory requirements granting tax exemption to fraternals. These requirements are discussed below. a. Lodge system The federal exemption has always required fraternals to be organized under the "lodge system." A lodge system is a structure in which there are local branches, chartered by a parent organization, and governed by a representative form of government. It is insufficient for an organization to have only one lodge. 21/ Obviously, a fraternal with no lodges would not be exempt. 22/ The requirement of an active lodge system prevents 501 (c) (8) from being utilized as a tax shelter. During 1985 member societies of the National Fraternal Congress of America expended $242,438,746.00 in maintaining their lodge systems and in carrying out fraternal programs. Many types of taxable entities 20/ Income Tax Reg. § 1.501 (c) (8) (a), Attachment V. 21/ Rev. Rul. 55-495, 1955-2 C.B. 259, Attachment W. 22/ Rev. Rul. 63-190, 1963-2 C.B. 212, Attachment X. - 8 - ZUCKERT. SCOUTT, RASENBERGER & JOHNSON pay less annually in actual taxes to the U.S. Treasury than fraternals expend to assist thousands of local communities through the lodge system. In an early case denying exemption for lack of a lodge system, the court stated -- By the "lodge system" is generally understood an organization which holds regular meetings at a designated place, adopts a representative form of government, and performs its work according to a ritual. 23/ The evidence in the case revealed that the organization was run like a business corporation and not like a fraternal. Its purpose was to sell insurance to lodge members and to members of other associations. The organization held a meeting every three years at which delegates representing the local lodges were. allowed to attend. The organization's business was run by a board of directors, which consisted of its president, a treasurer, a secretary, two members OE its audit committee and three of its members. A lodge system must be "active" i.e., a society's fraternal and benevolent purposes must be manifested in tangible acts. 24/ 23/ Western Funeral Benefit Association V. Hellmich, 2 F.2d 367, 369 (E.D. Mo. 1924), Attachment Y. 24/ Fraternal Order of Civitans V. Commissioner, 19 T.C. 240 (1952), Attachment Z. - 9 - ZUCKERT. SCOUTT, RASENBERGER & JOHNSON Members may also participate in society-sponsored fraternal, charitable and public service activities as well as through lodge membership meetings and social functions. 25/ Fraternals are governed from the bottom up. Members vigorously exercise the power to elect leaders of the individual lodges as well as the national fraternal leadership. Members also have the power to change the terms of their own fraternal insurance contracts by amending the society's by-laws. b. Insurance Fraternals have always been required to provide insurance benefits to members to qualify for the federal tax exemption. Although the Service demonstrated early confusion about fraternal insurance, 26/ it shortly thereafter restated the basic two-part test for exemption: [A] society in order to be exempt must meet two tests: (1) it must be operated under the lodge system, or for the exclusive benefit of a society so operating, and (2) it must have an established system for the payment of life, sick, accident, or other benefits to its members or their dependents. Nowhere does the statute or the regulation provide that 25/ See G.C.M. 34607 (September 13, 1971), Attachment AA. 26/ See, O.D. 690, 3 C.B. 236 (1920) (Attachment BB), revoked by I.T. 1516, I-2 C.3. 180 (1922) (Attachment CC). - 10 - ZUCKERT. SCOUTT. RASENBERGER & JOHNSON one of these features predominate. The only requirement is that both of these features shall be present. 27/ (Emphasis added.) The Service reaffirmed this position in Rev. Rul. 73-165, 1973-1 C.B. 224. (Attachment DD) The Tax Court has held the statutory requirement that the organization qualifying for exemption provide "for the payment of life, sick, accident, or other benefits to the members of such society. " would not be satisfied if benefits were provided to only one limited class of members. 28/ The Service, however, has permitted an organization to have two classes of membership, where one class was not entitled to receive benefits. 29/ C. Membership A'society will not be tax-exempt if it does nothing more than insure members. To qualify an organization must also be fraternal - its members must share a common bond. 30/ The class.: definition was formulated by the Eighth Circuit Court of Appeal in 1896: 27/ I.T. 1516, supra. 28/ Polish Army Veterans Post 147 V. Commissioner, 24 T.C. 891 (1955), aff'd, 236 F.2d 509 (3rd Cir. 1956), Attachment EE. 29/ Rev. Rul. 64-194, 1964-2 C.B. 149, Attachment FF. 30/ See, Commercial Travelers Life and Accident Association %. Rodway, 235 Fed. 370 (N.D. Ohio 1913) (Attachment GG) (exemption denied to association that had no fraternal features and was not organized according to the lodge system). - 11 - ZUCKERT. SCOUTT, RASENBERGER & JOHNSON We must accordingly assume that the words "fraternal-beneficial" were used in their ordinary sense, -- to designate an association or society that is engaged in some work that is of a fraternal and beneficial character. According to this view, a fraternal-beneficial society, within the purview of the Missouri statute, would be one whose members have adopted the same, or a very similar, calling, avocation, or profession, or who are working in unison to accomplish some worthy object, and who for that reason have banded themselves together as an association or society to aid and assist one another, and to promote the common cause. The term "fraternal" can properly be applied to such an association, for the reason that the pursuit of a common object, calling, or profession usually has a tendency to create a brotherly feeling among those who are thus engaged. It is a well-known fact that there are at the present time many voluntary or incorporated societies which are made up exclusively of persons who are engaged in the same avocation. As a general rule such associations have been formed for the purpose of promoting the social, moral, and intellectual welfare of the members of such associations, and their families, as well as for advancing their interests in other ways and in other respects. Many of these associations make a practice of assisting their sick and disabled members, and of extending substantial aid to the families of deceased members. Their work is at the same time of a beneficial and fraternal character, because they aim to improve the condition of a class of persons who are engaged in a common pursuit, and to unite them by a stronger bond of sympathy and interest. Such associations may well be described, in the language of the statute, as "organizations formed for fraternal- beneficial purposes. We think, therefore, that the legislature declared, in effect, or intended to SO declare, that when a certain number of persons, among whom some natural bond of sympathy or interest existed, should form an - 12 - ZUCKERT. SCOUTT, RASENBERGER & JOHNSON association for self-improvement, or for the purpose of aiding one another and strengthening the bond of union, such association might be consolidated into a corporation, and incidentally, to further the ends of creation, might provide for the relief of members and their families, in case of sickness or death, by levying assessments and issuing benefit certificates. "31, [Emphasis added. 1 The Board of Tax Appeals denied tax exemption to an association organized to manage a relief fund for the payment of sickness, accident, and death benefits to members on similar grounds, namely that there were no distinctively fraternal objects unifying the members. 32/ The court said of the organization that -- It is entirely without any social features. [N]one of these [members] look to the petitioner for any betterment in social and laboring conditions. There is no fraternal object which moves them to seek membership in the Association, but rather the motive is mercenary. The petitioner has neither lodges, rituals, ceremonial, or regalia; and it owes no allegiance to any other authority or jurisdiction. It is not a "fraternal beneficiary association" operating under the lodge system, within the meaning of Section 231(3) of the Revenue Act of 1918, and, therefore, is not entitled to exemption under the provisions of that section. 337 31/ National Union V. Marlow, 74 Fed. 775, 778 (8th Cir. 1896), Attachment HH. 32/ Philadelphia and Reading Relief Association V. Commissioner, 4 B.T.A. 713 (1926), Attachment II. 33/ Philadelphia and Reading Relief Association, 4 B.T.A. at 726. - 13 - ZUCKERT. SCOUTT. RASENBERGER & JOHNSON The mere fact of membership in the organization does not of itself create the fraternal common bond. 34/ A "fraternal" organization must not only recite its fraternal purposes in its governing documents, but it also must actually engage in activities to implement its purpose. 35/ In many cases, the fraternal purpose will be to better the quality of life of the organizations' own members. For example, the Hip Sing Association was formed and operated to conduct social and religious activities at which English could be studied as a means of preparing Chinese-Americans to obtain employment, and generally to improve their social, moral, and intellectual welfare. 36/ d. Permissible forms of benefits Fraternals are required to offer insurance to their members to be eligible for federal tax exemption. In addition to insurance, fraternals may offer "other benefits." 34/ See, Polish Army Veterans Post 147 V. Commissioner, supra, Attachment EE. 35/ Fraternal Order of Civitans V. Commissioner, 19 T.C. 240 (1952), Attachment z. 36/ Hip Sing Association V. Commissioner, T.C. Memo 82-203 (1982). (Attachment JJ) (Exemption was recognized as a section 501 (c) (10) fraternal order rather than a section 501 (c) (8) fraternal beneficiary society due to the absence of a systematic method for provision of life and other benefits.) - 14 - ZUCKERT. SCOUTT. RASENBERGER & JOHNSON The Service has analyzed the term "other benefits" with reference to the historical development of insurance in the United States. Finding that life, sick and accident benefits were commonly available at the turn of the century, the Service has noted that the framers of the statute did not intend the language to be limiting: The historical development of life, accident, and health insurance discloses that in 1909 when Congress included life, sick, and accident benefits as those permitted to be paid by an exempt fraternal beneficiary society, these were also the only benefits then commonly payable with respect to an individual from commercial insurers. The number and nature of risks against which an individual may insure have greatly expanded since that time. Given the state of the insurance industry early in the century, however, we are hard pressed to identify benefits Congress might have intended to exclude by limiting payments to "life, sick, accident and other benefits." Arguably, in 1909, a "limitation" to life, sick, accident and other benefits was not much of a limitation at all. Accordingly, we believe the term "other benefits" should be construed liberally. This does not mean, however, that a fraternal beneficiary society should be able to insure its members against any risk for which commercial insurance might now be available; the application of the rule of ejusdem generis requires that "other benefits" be limited to benefits that are of like kind and character to "life, sick, and accident benefits. "37/ 37/ G.C.M. 38192 (December 7, 1979) (footnotes and footnote references omitted). (Attachment KK) - 15 - zuckert. SCOUTT. RASENBERGER & JOHNSON The Service has taken the position that "other benefits" must be types that insure against personal bodily injury or the loss of earning power. 38/ Under this principle, health benefits are permissible to the extent they reimburse the cost of hospital care and the loss of income due to sickness. 39/ The operation of an orphanage for the surviving children of deceased members is permissible because the orphanages provide a service similar to life insurance, i.e., provision for children is a form of financial security. 40/ Legal defense benefits are permissible fraternal benefits to the extent they provide protection against lawsuits that threaten the risk of loss of earning power. 41/ In addition, annuities are permissible benefits because they protect against the risk of outliving one's earning power and accumulated savings. 42/ The Service and the Tax Court disagree with the Ninth Circuit Court of Appeals as to whether fraternals may offer property and casualty insurance. The Ninth Circuit ruled that the term "accident" is a trade term in the insurance industry 38/ See, G.C.M. 38192, supra. (December 7, 1979). 39/ Ibid. 40/ Rev. Rul. 84-49, 1984-1 C.B. 134, Attachment LL. 41/ See, G.C.M. 38312 (March 20, 1980), Attachment MM. 42/ See, G.C.M. 39575 (November 18, 1986), Attachment NN. - 16 - ZUCKERT. SCOUTT: RASENBERGER & JOHNSON referring to accidents to property as well as to persons. 43/ The Service's position has been that the word "accident" is limited to accidents to persons. 44/ 43/ Grange Insurance Association of California V. Commissioner, 317 F.2d 222 (9th Cir. 1963), rev'g, 37 T.C. 582 (1961), Attachment 00. 44/ See, G.C.M. 35639 (January 28, 1974), Attachment PP. - 17 - ZUCKERT, SCOUTT, RASENBERGER & JOHNSON II. THE FRATERNAL EXEMPTION SHOULD BE RETAINED A. The requirements of present law for exemption as a fraternal are adequate The Service and the Courts have been vigilant to assure that unqualified organizations do not achieve exemption as fraternals. The National Fraternal Congress of America strongly supports increased funding for the Internal Revenue Service to maintain and increase the size of its highly qualified audit staff to prevent any possible misuse of the existing fraternal exemption. Each of the requirements for exemption as discussed above has been at issue in a major case or ruling. Organizations have been denied recognition as fraternals for lack of an active lodge system, lack of a fraternal common bond, failure to provide adequate member benefits, failure to engage in fraternal activities, failure to qualify under state law as not for profit, and failure to provide proper benefits. These cases and rulings establish distinct and enforceable guidelines for qualification as a fraternal. The Service's record in the administration of these rules has been exemplary. Recently, for example, Service auditors have raised a variety of issues in connection with the type of benefits fraternals may provide. These issues have been resolved by the National Office on a case by case basis. In short, the present requirements for exemption are meaningful and are strictly enforced in practice. - 18 - ZUCKERT. SCOUTT, RASENBERGER & JOHNSON B. Fraternals are unique The major analytical flaw in recent inquiries about the tax-exempt status of fraternals has been the attempt to analogize fraternals to other types of tax-exempt or taxable organizations. A fraternal bears some resemblance to an insurance company, a membership club, an educational organization, and a public charity. A fraternal, however, is none of these. Fraternals are unique and must be judged on their own merits rather than by misplaced comparisons. Fraternals are member-directed organizations for mutual aid. Insurance is an important element of this mutual aid. Fraternal and benevolent programs also reflect the common bond of fraternalism. While the stand-alone effect of a single lodge program such as financial assistance for a disabled member, transportation for the elderly, remodelling a parish church, operation of a youth camp, etc., may be relatively small, the cumulative impact of millions of such activities is enormous in American society. Tax exemption makes this possible. Fraternal volunteer programs extend to the public at large in communities where lodges are located. Local lodge members actively support community benevolent and charitable organizations. Lodges themselves initiate and actively participate in numerous acts of community service. Lodges also regularly participate in programs initiated and funded by the - 19 - ZUCKERT, SCOUTT. RASENBERGER & JOHNSON national fraternal organization. Viewed in the aggregate, the overall community impact of fraternal volunteers cannot be underestimated. The key to fraternalism is the lodge system where authority and responsibility flow from the bottom upwards. Each lodge is self-governing. The lodge system, however, is expensive to maintain, support and nurture. This is the primary role of the national organizations, which provide extensive financial, personnel and program assistance to local lodges. National organizations often initiate and fund fraternal programs to benefit members and their communities. Seed money and grants from national organizations generate additional contributions at the local level when volunteers implement the program. One tax- exempt dollar from the national organization can produce multiple returns at the local lodge level. During 1985 member societies of the National Fraternal Congress of America expended $242,438,746.00 to maintain the fraternal system. Of this amount $10,216,878.00 was devoted :0 charity; $11,348,642.00 went to educational programs; $14,556,610.00 was spent on religious activities; $44,271,143.00 was allocated for lodge benevolence; and $81,259,153.00 went to support local lodge activities. Tax-exemption makes this possible. - 20 - ZUCKERT. SCOUTT, RASENBERGER & JOHNSON No other organization, exempt or taxable, has anything in form or function which duplicates the fraternal system. Any meaningful study of fraternals must focus on the lodge system, including the public benefits from mutual aid and the private costs to fraternals of maintaining the lodge system. C. Fraternals continue to carry out their historic exempt purposes Fraternals have remained faithful to those historic exempt purposes upon which their exemption was based. They have not used earnings to acquire commercial businesses. State laws forbid fraternals from generally selling insurance to nonmembers, thereby precluding fraternals from competing for commercial insurance business even if they desired to do SO. Fraternal earnings have remained dedicated for fraternal purposes -- required insurance reserves, maintenance of the lodge system, and fraternal, benevolent and charitable programs. D. Tax exemption does not give fraternals an unfair competitive advantage The idea of fraternals competing with commercial insurers for "customers" is untenable. A fraternal may provide insurance only to persons who are members or eligible for membership. Membership is based on religion, ethnic origin, vocation or some other common bond independent of a desire for insurance coverage. - 21 - ZUCKERT, SCOUTT, RASENBERGER & JOHNSON If tax exemption allowed fraternals to compete unfairly against commercial insurers, one would expect fraternals to have gained business at the expense of commercial insurers. The truth of the matter is just the opposite. Since the turn of the century, the fraternal share of total insurance in force has decreased steadily. Today fraternal insurance accounts for less than 1.4 percent of the total life insurance in force in the United States. Fraternals cannot use their tax exemption for "competitive" advantage because of the extensive benevolent, religious, educational, patriotic, fraternal, charitable and volunteer programs their very nature requires. Maintaining and supporting a fraternal lodge system with its many forms of mutual aid and community outreach requires ongoing commitments of substantial time and money. The expense of maintaining a fraternal system and program is the main reason why few new fraternals have been formed since the early part of the century. The historic lack of abuse in this area indicates strongly that the expense of operating a fraternal society outweighs any perceived savings from tax exemption. - 22 -