Treasury Issues New Examples of Program-Related Investments

Last month the Treasury Department and IRS issues an Advanced Notice of Proposed Rulemaking which would modify the Treasury Regulations to provide new examples of program-related investments (PRIs) for private foundations.  This is a welcome development as these examples provide further clarity with respect to the breadth of PRIs.

While foundations generally accomplish their charitable purposes (and satisfy their payout requirement) by making grants to public charities, the rules are actually much broader and include (among other qualifying distributions), the making of PRIs.  PRIs are an alternative form of financing to flow capital to charitable programs, a form that allows for (and anticipates) repayment thereby enabling reinvestment of that same capital and other charitable programs.  A program-related investment is an investment that has a primary purpose of accomplishing one or more charitable purposes, no significant purpose of producing income or appreciation of property, and no purpose to accomplish prohibited political purposes.  The Treasury Regulations have for the past 40 years provided ten examples of program-related investments.  Because these examples have not necessarily kept pace with the changes in forms of financing and opportunities for the making of PRIs, the new examples were needed.  These additional examples demonstrate the use of PRI’s in other contexts (including international contexts) and with other forms of financing (loans, equity investments, credit enhancement, etc.).  The flexibility of PRIs and their allowance for reinvestment and recirculation of capital make PRIs an attractive complement to a foundation’s standard grantmaking activities.

The new examples (which can be relied upon now) can be found at this link.  For a more detailed discussion on the rules related to program-related investments see the my paper on PRI’s presented in August 2011 at the State Bar of Texas’s Governance of Nonprofit Organizations Course.


Recognizing and Avoiding Self-Dealing: Both Direct and Indirect

Recognizing and Avoiding Self-Dealing: Both Direct and Indirect , Salk Institute 40th Annual Tax and Management Seminar for Private Foundations, La Jolla, California, March 14-16, 2012

Also presented with Terri Helge at Dallas Society of CPAs, Annual Conference, May 4, 2012

This seminar paper looks specifically at the private foundation prohibition on self-dealing under Section 4941 of the Internal Revenue Code. The paper explores both direct self-dealing, as well as indirect self-dealing offering the law as well as a number of case studies to explore these issues.


Overview of Nonprofit Organizations: The Basic Framework

Overview of Nonprofit Organizations: The Basic Framework, University of Texas 29th Annual Nonprofit Organizations Course, Austin, Texas, January 18-20, 2002

This seminar paper provides a basic framework for the entire nonprofit sector, explaining the differences between private foundations and public charities and briefly discussing other types of nonprofit entities. In addition, this paper lays out the various types of structures and nonprofit entities and discusses choice of form. Finally, this paper discusses end of life issues of nonprofit organizations as well.

This paper was co-presented with Professor Terri Helge of Texas Wesleyan School of Law.