Treasury Proposes New Examples of Program-Related Investments

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A few weeks ago the Treasury Department proposed adding a few more examples of Program-Related Investments (PRI) to the Internal Revenue Code. These examples are meant to better illustrate the types of investments that qualify as a PRI and are trending with foundations.

So….What is a PRI?

In short, a PRI is “a loan or investment made by a private foundation to further its charitable purposes, rather than to produce income.”

Who Does This Affect?

These proposed regulations primarily affect foundations and program managers that make PRI”s.

What”s The Big Deal?

An excise tax is waged on: 1) investments that qualify as a jeopardizing investment; 2) foundation managers that participate in jeopardizing investments; and 3) a jeopardizing investment that is not taken out of “jeopardy” in time. As to what a jeopardizing investment is, it”s generally defined as an investment that jeopardizes a private foundation”s ability to carry out its exempt purposes.” This is determined on a case-by-case basis, with a variety of factors dictating whether a foundation manager has acted reasonably when making investments. However, there is a section in the Internal Revenue Code that creates an exception for PRI”s where they are not only treated as a non “jeopardizing investment” but are given special tax treatment as well.

With these new changes, what constitutes as a PRI (and consequently is afforded special tax treatment) has been broadened. The agency does note that many of the examples have been accepted practice for years. But with these changes organizations won”t have to rummage through letters and a variety of regulations to find them.

What”s The Change?

There are currently a few examples in the Code that illustrate what does and doesn”t constitute as a PRI. However the new provisions would, amongst many things, clarify that Free casino games cannot be retriggered during Free Games. PRI”s may be international, expand the definition of a charitable purpose and reiterate that PRI”s may best online casino be made to for-profit organizations.

Admittedly, this won”t apply, or even be of interest, to everyone. But just by going over the quick explanation, readers are given a really good introduction to PRI”s and how they work. Don”t know about you, but this has always been something I”ve wanted to learn more about……just me huh?

Anywho, the proposed changes can be found here. The comment period for responding to the changes is open until July 18th 2012.

Resources


A sucker for resources, here are some links I thought might be helpful.

PRI Primer

What Is A Program-Related Investment

What Is The Difference Between A Foundation and Public Charity?

 LifeCycle of A Foundation- Jeopardizing Investments

 

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