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• Guidance to foundations on PRIs: IRS invites ABA Section on Taxation to develop new examples of PRIs

  March 25, 2010

  By Lisa Hagerman, Thursday, March 25

  As Peter Berliner, Managing Director, PRI Makers Network noted in his March 2010 PRI Makers Newsletter, the IRS invited the ABA's Section on Taxation to develop new examples of PRIs. The PRI Taskforce, co-chaired by David Chernoff of the MacArthur Foundation and Rob Wexler of Adler & Colvin, has submitted an updated set of 17 proposed new examples (download PDF here). The executive March 3, 2010 draft executive summary notes the key points addressed by the examples include:

  1. If an activity is charitable when conducted in the U.S., it is likewise charitable if conducted in a foreign country;
  2. Efforts to preserve and protect the natural environment and endangered species serve a charitable purpose;
  3. Raising the living standards of needy families in underdeveloped or developing countries serves a charitable purpose;
  4. The recipients of loans and working capital need not themselves qualify for charitable assistance because they are “merely the instruments” by which the charitable purposes are served;
  5. The presence of a seemingly high projected rate of return should not, alone, prevent an investment from qualifying as a program-related investment because determination of the significant purposes for an investment requires a facts and circumstances analysis that takes into account all of the objective facts and circumstances of an investment, including evidence of the motive behind the investment, and the potential production of income or property appreciation is merely a factor in the analysis;
  6. Program-related investments may be properly accomplished by or through loans to individuals, tax-exempt organizations, or for-profit domestic or foreign organizations, as well as by or through equity investments in for-profit domestic or foreign organizations, including limited liability companies;
  7. Providing credit enhancement, whether in the form of a guarantee, letter of credit, or otherwise, for a borrowing by a third party that accomplishes a charitable purpose may qualify as a program-related investment; and
  8. The existence of an “equity kicker” as part of the overall return does not prevent an investment from qualifying as a program-related investment.

  
  The IRS is in the process of reviewing the examples and will decide which they will add to existing PRI regulations and their exact wording.
   

  posted 3:25PM 03/25/2010 by Lisa Hagerman
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• Casey Foundation Pledges another $25 Million for social investments bringing total to $125 million

  March 05, 2010

  By Lisa Hagerman, Friday, March 5th, 2010

   

  The Annie E. Casey Foundation announced yesterday an additional $25 million allocation for social investments expanding their social investment program to $125 million or 5 percent of the philanthropy’s $2.5 billion endowment. The Foundation plans to target a portion of the additional funding to its program strategies in Baltimore, Atlanta and New Haven, Conn.   See also yesterday’s article in Philanthropy News Digest

   

  The press release (download PDF) quotes mission investing pioneers Christa Velasquez and Doug Nelson:

   

  “Social investing is an important tool for aligning non-grantmaking dollars with programmatic priorities,” says Christa Velasquez, director of social investments at the Casey Foundation and co-chair of the PRI Makers Network, an association of over 90 grantmakers that use program-related and other investments to accomplish their philanthropic goals. “For example, applying this approach might result in a foundation with a commitment to home ownership investing in low-income housing or to entrepreneurship in venture capital, or commitment to underserved communities making deposits in community development banks and credit unions. A foundation with an environmentally focused mission might invest in clean technology, green collar jobs or sustainable real estate projects.”

   

  “This decision represents a vote of confidence in a set of innovative solutions that can achieve greater social impact for kids, families and communities in spite of a reduced endowment,” says Douglas W. Nelson, president and CEO of the Annie E. Casey Foundation. “Social investments allow us to increase the resources dedicated to our programmatic work and stretch foundation dollars by reinvesting the money in programs that have shown the strongest results.”

   

  Financial returns on Casey’s 2008 social investment portfolio reaffirms that mission investments can deliver on both the financial and social returns as Christa Velasquez notes in the More for Mission Spring 2009 Newsletter (download PDF):

   

   “At year end 2008 the Annie E. Casey Foundation’s social investment portfolio was the best performing part of the foundation’s endowment. With an expected return of 3.5 percent we’re the only part of the endowment in positive territory. It is interesting, because Casey made the unusual choice of making program-related investments with below-market rates of return out of our endowment.”  

  posted 9:28AM 03/05/2010 by Lisa Hagerman
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