July 27, 2012
More on Use of 501(c)(4)s in the Political Campaign Context - Disclosure Requirements, Need For Reform
As reported in The New York Times as well as other news sources (including the live blogging herein), the IRS announced in Congressional hearings on Wednesday that 50 political groups have obtained 501(c)(4) exemptions in 2010 and 2011.
In the Forth Worth Star-Telegram, an editorial entitled "IRS needs to strengthen tax code to uncover political nonprofits" criticizes the use of 501(c)(4)s for political campaign purposes, concluding: "Tax-exempt status is intended to promote the public good, not enable wealthy and powerful donors of any political stripe to wield influence without public scrutiny."
In the BNA Daily Tax Report on Wednesday, an article addressed the disclosure requirement with respect to 501(c)(4) donors. Although 501(c)(4)s are required to inform the IRS, but not the public, of the identity of donors, many organizations find ways around these full disclosure rules. The organization can list the donor as "anonymous" if it doesn't know where the money originated from and "can't easily find out," or client trust accounts are used (i.e., donors make contributions through law firms that transmits the money to the organization, with only the law firm's name disclosed). Cashier's checks and bank wire transfers are other means to keep donors anonymous and, thus, out of the IRS's purview. Another potential area for reform?
July 25, 2012
Liveblogging the Ways & Means Subcommittee Hearing
As my fellow blogger Nicholas Mirkay noted earlier in the week, the second House Ways & Means Subcommittee on Oversight hearing on exempt organizations is scheduled for this morning at 9:30 EST. I'll be liveblogging the hearing in the comments to this post (see the fine print just below the post.) I have to manually enable the comments on Typepad, so there may be a little bit of a delay as they go up. I will also be doing this *live* so I'm going to beg your forgiveness for typos and such from the outset.
It is a fantastic line up this morning. Sometimes, it is easy to get cynical about who ends up on these panels but not today - the Subcommittee did its homework and got some great people, including Prof. John Colombo (who posts here, not that we are biased!), Prof. Donald Tobin (well known to all of us who teach tax), Thomas Hyatt of SNR Denton, and Eve Borenstein, Queen of the Form 990. I really think it will be an informative hearing. Here's a link to the official announcement.
If you are so inclined, you can watch this streaming here. As statements and such become public, I'll update this post to include links to them. So warm up your coffee and off we go... To the comments!
UPDATE: Hopefully, all of those comments came through for you all. Feel free to contact me if there were any issues. Here are some of the posted materials for the day:
By the way, in my comments I sometimes refer to the Comn'r as short hand - I mean Steve Miller, who is actually Deputy Commissioner for Sevices and Enforcment and used to be the head of TEO for the IRS.
SECOND UPDATE: Some of the later comments are not showing up when I hit comments on the front page (after the post where I indicate I have technical issues). They are, however, showing up in the dashboard for bloggers, so I will try to figure that all out. Please drop a comment if the last one you see from me is that I'm having technical issues, or if they go all the way to the end of the hearing.
July 24, 2012
Is IRS Rethinking 501(c)(4) Political Activity Rules?
As reported in today's Daily Tax Report, IRS EO Director, Lois Lerner, stated in a July 17th letter to an organization raising concerns about the political campaign activities of 501(c)(4) organizations:
The IRS is aware of the current public interest in this issue. These regulations have been in place since 1959. We will consider proposed changes in this area as we work with the IRS Office of Chief Counsel and the Treasury Department's Office of Tax Policy to identify tax issues that should be addressed through regulations and other published guidance.
July 18, 2012
Donor Advised Funds ... Let's get ready to rumble!
In the red corner - The US Treasury
In the blue corner - The Congressional Research Service
The bout - mandatory payouts from donor advised funds
In December, 2011, Treasury issued the long awaited "Report to Congress on Supporting Organizations and Donor Advised Funds," which was mandated by the Pension Protection Act (PPA). In general, the Treasury report took the position that many of the reforms implemented as part of the PPA were sufficient to address the abuses seen in the area. With specific regard to DAF distributions, Treasury noted favorably that the average payout rates for donor advised funds exceeded the private foundation 5% requirement, although Treasury did indicate that it was premature to make any recommendation based on the paucity of available data (DAF information was added to the Form 990 in 2008)(Treasury Report pp. 81-82).
Fast forward six months. On July 11, the Congressional Research Service issued, "An Analysis of Chariable Giving and Donor Advised Funds," using many of the statistics regarding donor advised funds cited in the Treasury report. Unlike the more cautious but generally favorable Treasury report, the CRS report concluded that donor advised funds should have a mandatory distribution requirement - and further, that it should be applied on a per fund basis. The CRS report focuses on the fact that although average distribution rates among donor advised funds are quite high, there are many DAFs that make little or no distributions at all. Janne Gallagher at the Council on Foundations (CoF posted the CRS report linked above, which is not generally available online) wrote a critique of the CRS report, posted at the CoF site here.
Interestingly, the Summary section of the CRS report notes that "The Treasury study was released in 2011. Senator Chuck Grassley, Senate Finance commitee chairman at the time of the 2006 legislation, has criticized the study as being 'disappointing and nonresponsive.'"
Despite all the statistics and analysis, however, it seems to me that the case has not been made from a policy perspective as to why we should (or should not) require a payout from DAFs. I find myself saying, "well, so there are a few DAFs not making annual distributions - so what?" To some degree, the CRS report comes the closest to reciting a reason - that DAFs are in fact under the functional control of their donors and therefore, they should be regulated similarly to private foundations. Treasury appears not to assume donor control; CRS assumes donor control because the DAF sponsoring organizations generally follow donor suggestions. Clearly, the parties disagree on factual nature this issue - I guess we will see more in Round 2.
Hat tip to my friend Chris Hoyt at the University of Missouri (KC) Law School (you know him... really, really terrible jokes!) for pointing me to the CoF materials.
July 11, 2012
IRS Inspector General Report Faults EO Complaint Follow-Up
A recent report by the IRS Inspector General found that while the IRS is doing a better job of acknowledging receipt of complaints about EO violations, there are issues with internal controls and tracking of such complaints. For example, the report found that the IRS couldn't find records of about a quarter of the complaints (31 of 120 cases surveyed from October 1, 2009 through June 17, 2011) and wasn't keeping information updated in its tracking database in a number of other cases. The report recommended improving internal tracking and review procedures for complaints.
I hope the IRS updates its procedures soon - presidential election years are always high-volume complaint times, and in the wake of Citizens United, this one promises to be a doozy, with (c)(4)'s outspending PACs in the political arena, and some church officials trampling the rules regarding political campaign intervention (e.g., Bishop Jenky of Peoria).
July 09, 2012
IRS Issues Proposed Regulations Implementing 501(r)
Part of the health care overhaul passed by Congress included a new subsection of Section 501, 501(r), that added new requirements for tax-exemption of nonprofit hospitals. These new requirements are mostly what I would call procedural in nature: requiring a health needs assessment and written charity care policies, as well as regulating the billing of indigent patients and debt collection actions. The legislation left most of the implementing details to the IRS. In July, 2011, the IRS issued Notice 2011-52, providing guidance with respect to the health needs assessment requirement. The IRS now has released proposed regulations addressing the remaining three areas (written charity care policies, billing, and debt collection). The agency is seeking public comment on the proposed regulations by September 24, 2012.
June 14, 2012
IRS Provides New Information for Credit Unions Facing Automatic Revocation of Exemption
The IRS has provided new information for federal and state credit unions that have had either their own tax-exempt status revoked automatically for failure to file annual returns for three years or have received a notification that their parent organization has been subject to such revocation. The new information addresses three common situations:
- When a federal credit union has had its tax-exempt status revoked even though it is not required to file an annual return (letter to IRS asserting federal credit union status required).
- When a state credit union, which is required to file an annual return, has had its tax-exempt status revoked (application for reinstatement of tax-exempt status required if the credit union was required but failed to file annual returns for three consecutive years).
- When a credit union has been notified that its parent organization has lost its tax-exempt status (noting a situation that has arisen because some state agencies that had previously filed group information returns on behalf of all exempt state-chartered credit unions under their control and supervision have ceased to do so).
June 12, 2012
ACT Urges Improvement of the IRS 501(c)(3) Application Form and Process
The Advisory Committee on Tax Exempt and Government Entities (ACT) released its eleventh report last week. The Exempt Organizations portion of the report focused on IRS Form 1023 - the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Here are their specific recommendations for improving the process by which more than 55,000 organizations per year seek section 501(c)(3) tax-exempt status from the IRS:
- the IRS should expedite the internal processes and commit the necessary resources (human, financial, and technical) to transform Form 1023 to an interactive Web-based Form e-1023 that can be filed electronically and stored, transmitted, and disseminated in an electronic database format. This information will serve as the electronic gateway for IRS knowledge about tax-exempt organizations;
- the IRS should redesign Form 1023 with four primary objectives: to make the form (i) effective at identifying whether organizations meet the requirements for recognition of exemption; (ii) consistent with the structures and definitions of Form 990; (iii) simple by using a short core form with supplemental schedules that will ease the filing burden on small and/or less complex organizations; and (iv) educational by organizing questions based on substantive exemption requirements and including explanatory information;
- the IRS should develop more educational tools about Form 1023 including tips for filing Form 1023, and more information about the substantive requirements for recognition of exemption. The development of these tools, coupled with the redesign of Form 1023, should obviate the need for a separate “Form 1023-EZ” for small organizations. The ACT does not recommend the development of such a form;
- the IRS should coordinate with the Department of the Treasury and the Office of Chief Counsel on the issuance of precedential guidance about tax-compliant alternatives to the creation of new Section 501(c)(3) organizations, such as fiscal sponsorships and donor-advised funds;
- the IRS should carefully examine recurrent complaints about the Form 1023 filing and review process and take appropriate and expeditious steps to improve the effectiveness, efficiency, and timeliness of that process; and
- the IRS should expand its use of the Review of Operations (ROO) program (to follow up on Section 501(c)(3) organizations whose 1023 forms indicate potential future compliance issues), and should consult with state charity regulators regarding indicia that may warrant such follow-up.
May 30, 2012
What is a Religious Organization?
Over 40 Catholic organizations (including my employer, the University of Notre Dame) have filed coordinated lawsuits against the federal government challenging a regulation that would require the group health insurance sponsored by most employers to cover birth control and other services that are contrary to Catholic teaching. See Notre Dame press release, the Washington Post blog entry. One among the many interesting aspects of this dispute is the definition of a "religious employer," which is critical because group health plans sponsored by religious employers are exempt from the requirement. As noted in the background section of a recently released Proposed Rule that the federal government is hoping will resolve this dispute,
a religious employer is one that (1) has the inculcation of religious values as its purpose; (2) primarily employs persons who share its religious tenets; (3) primarily serves persons who share its religious tenets; and (4) is a non-profit organization described in section 6033(a)(1) and section 6033(a)(3)(A)(i) or (iii) of the Code.
Since the first three prongs of the definition are relatively vague (for example, what are the thresholds for "primarily employs" and "primarily serves"?), arguably the narrowest part of this definition is the fourth prong that refers to two of the mandatory exceptions from having to file the Form 990 annual return otherwise generally required for organizations exempt from tax under section 501(a). As the background section for the proposed rule elaborates, "[s]ection 6033(a)(3)(A)(i) and (iii) of the Code refers to churches, their integrated auxiliaries, and conventions or associations of churches, as well as to the exclusively religious activities of any religious order."
Churches, and conventions or associations of churches, are of course religious organizations under section 501(c)(3) but many clearly religious organizations do not qualify as churches (or conventions or associations of churches) for federal tax purposes because "church" for these purposes is limited to organizations that generally have in-person worship meetings and other characteristics common to the historical, Western understanding of a "church." See, e.g., the previous blog entry regarding the Foundation of Human Understanding case. The definition of intergrated auxillary is more complicated, but in general an intergregated auxillary must be both affiliated with a church or a convention or association of churches and, most critically, be "internally supported," which is not the case if an organization offers admissions, goods, services or facilities (e.g., educational or health care services) for sale to the general public and recevies more than 50 percent of its support from a combination of governmental sources, public soliciation of contributiosn, and receipts from such sales. See 26 C.F.R. 1.6033-2(h). It is this last point that places the University of Notre Dame and presumably the other plaintiffs in these lawsuits outside of this exception.
This dispute therefore highlights an increasingly important issue: assuming that for constitutional or policy reasons it is required or desirable to generally grant "religious" organizations exemptions from laws that would conflict with their religious beliefs, how broad should the definition of a "religious" organization be? Here the federal government has chosen a relatively narrow definition that was created for a different purpose (Form 990 filing exemptions), and at the end of the day it is the narrowness of this tax-based definition that has led to these lawsuits.
May 29, 2012
IRS Revokes 501(c)(4) Exemption for Training Women for Party Leadership
In a series of almost identical determination letters, the IRS revoked the section 501(c)(4) tax-exempt status of five organizations with the stated purpose of identifying of women interested in potential leadership roles with a particular political party and the development of a political leadership training program for such women. The IRS noted that each of the organizations is the affiliate of a national organization that shares the same purpose. The IRS had previously recognized their exemptions but upon further study of their applications has now determined that these previous recognitions were in error because the groups primarily benefit private interests, specifically the interests of a particular political party and its candidates. The IRS explicitly relied on American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989), noting that while that case involved section 501(c)(3) "the standard for determining what constitutes private benefit described in American Campaign Academy applies to both [section 501(c)(3) and section 501(c)(4)]". The rulings are 201221025, 201221026, 201221027, 201221028, and 201221029.
While the affected groups are, of course, not identified in the redacted rulings, the denial by the IRS last year of exemption for several similar training groups (see previous blog post) suggests these organizations may be related entities. The NY Times identified those groups as state affiliates of Emerge America, which identifies, trains, and encourages (Democratic) women to run for office. Interestingly, however, the more recent letters are much less redacted than the ones issued last year.
If these five organizations are in fact additional state affiliates of Emerge America, that would probably explain why the IRS choose to take a closer look at their applications even after the IRS had approved those applications. Then again, this activity may simply reflect the decision by the IRS to look more closely at section 501(c)(4) organizations more generally (see previous coverage of the IRS v. Tea Party dispute).
May 22, 2012
Nonprofits' Failure to Report Fundraising Costs is Widespread
As reported by the Nonprofit Quarterly, a Scripps Howard News Service new study (utilizing data reported to the IRS and available through Guidestar) revealed found that 15,389 nonprofit groups, or 41% of all domestic nonprofits with annual receipts of $1 million or more, report on their annual Forms 990 that they expended no dollars on fundraising. While this may be possible with respect to certain nonprofits, Scripps Howard did a further investigation, including interviews, which further revealed that a number of these zero-expense organizations actually do incur fundraising expenses but choose not to report them. The percentage of nonprofits with zero reported fundraising costs varies greatly by state, with 60% or more of the nonprofits in the following states reporting no fundraising expenses: Alaska, Arkansas, Idaho, Mississippi, and West Virginia (see a state ranking here). As the study states, some nonprofit executives that were interviewed admitted that fundraising costs are nonreported or underreported to lower their nonprofits' overhead rates, which donors and funders use to rate nonprofits' efficiencies and effectiveness in achieving their purposes.
[See also an article in the Chronicle of Philanthropy]
May 08, 2012
Quick Regulatory Update
Our friends at Treasury have been busy over the last two weeks, with two sets of regulations coming out in the charitable area:
1. Final Regulations Under Section 642(c). The IRS issued final regulations under Section 642(c) regarding the character of income for charitable lead trusts.
2. Additional Examples of PRIs under Section 4944. The IRS issued proposed regulations under Section 4944, adding a number of updated examples of "program related investments" for private foundations. Lots of good stuff in there.
I wanted to make you all aware these were out there - hopefully, more analysis later!
April 29, 2012
IRS Rules Foreign Political Activities Do Not Promote Social Welfare
In a final determination letter released earlier this month (201214035), the IRS ruled that a nonprofit organization did not qualify as a section 501(c)(4) social welfare organization because 80% of the organization's time would be spent supporting the political interests of a candidate in a foreign country. The letter is noteworthy because while it has long been thought that "intervention in political campaigns on behalf of or in opposition to any candidate for public office" (Reg. § 1.501(c)(4)-1(a)(ii)) extended to candidates for foreign public offices, to the best of my knowledge this is the first IRS ruling that expressly takes this position. Since the definition of political campaign intervention is generally the same under both section 501(c)(3) and section 501(c)(4), this (nonprecedential) letter indicates that the 501(c)(3) prohibition on such intervention also extends to candidates for foreign public offices.
Myanmar: US Eases Sanctions on Nonprofit Work
AP reports that the U.S. Treasury Department has eased restrictions on financial transactions in support of groups working in areas such as democracy-building, health and education, sport and religious activities. This step is part of a larger lifting of sanctions by Western nations in light of recent elections that say sweeping opposition party victories in that country. A Reuters report quoted a senior Treasury Department official as stating "[w]e are taking this step today to support a broader range of not-for-profit activity in Burma by private U.S. organizations and individuals to promote increased cooperation between the Burmese and the American people." The actual language of the eased restrictions can be found in Office of Foriegn Assets Control General LIcense No. 14-C relating to Burma.
LHM & KWS
April 24, 2012
Common Cause Releases ALEC IRS Complaint; ALEC Responds
Common Cause released yesterday its lengthy letter to the IRS asserting that the American Legislative Exchange Council (ALEC) has underreported its lobbying expenditures and does not qualify for section 501(c)(3) status. The online version of the letter in turn provides links to thousands of pages of exhibits that Common Cause says support its assertions. Common Cause filed the letter under the Tax Whistleblower Act, 26 U.S.C. § 7623(b), although there is no indication that Common Cause is seeking any financial reward if the IRS in fact determines that ALEC owes unpaid taxes.
Statement by Alan P. Dye on Latest Harassment Tactic Against ALEC by Liberal Front Groups
WASHINGTON – Alan P. Dye, legal counsel to the American Legislative Exchange Council (ALEC), issued the following statement in response to the frivolous IRS complaint by Common Cause against ALEC:
“The attacks on the American Legislative Exchange Council are based on patently false claims being made by liberal front groups that differ with ALEC on philosophical terms.
“The current complaint mostly ignores applicable law and distorts what it does not ignore. After three decades of counseling clients on nonprofit and federal disclosure requirements, it’s clear to me that this is a tired campaign to abuse the legal system, distort the facts and tarnish the reputation of ideological foes.
“Without question, Common Cause is a partisan front group masquerading as an ethics watchdog.”
April 23, 2012
ALEC's 501(c)(3) Status Under Pressure - Did Businesses Improperly Deduct Lobbying Expenses?
Questions continue regarding whether the American Legislative Exchange Council, or ALEC, qualifies for its claimed section 501(c)(3) status given its apparently extensive lobbying. Common Cause has long complained that ALEC underreports its lobbying activities, including filing a complaint making this allegation with the IRS last year. Its concerns have recently attractive significant media attention, including a New York Times article this weekend and NPR coverage last week and today. The recent attention began in the wake of the Trayvon Martin shooting because of ALEC's support of "stand your ground" laws, which led a number of corporate supporters of ALEC to end their funding (see, e.g., CBS News story), but has now grown beyond that limited issue . Common Cause recently filed a second complaint with the IRS, the details of which it plans to release later today.
ALEC states it "works to advance the fundamental principles of free-market enterprise, limited government, and federalism at the state level through a nonpartisan public-private partnership of America’s state legislators, members of the private sector and the general public." It has both state legislator members and private members, including prominent business corporations. One significant advantage of ALEC being classified as a section 501(c)(3) organizations is that the private members could deduct contributions to the group as charitable contributions, while contributions to other types of 501(c) organizations are generally not deductible to the extent they are used for lobbying (under Internal Revenue Code sections 162(e) and 6033(e)).
IRS Accused of Improperly Releasing 501(c)(3) Donor Information Tying Romney to Same-Sex Marriage Opponent
The National Organization for Marriage, a section 501(c)(3) organization supporting traditional marriage, released documents alleging showing that an unredacted Schedule B to its 2008 Form 990 that was obtained by the Human Rights Campaign and given to the Huffington Post must have come from the copy of the form filed with the IRS. In a letter to the IRS, NOM asserts that it was able to remove a layer of redacting on the Schedule to reveal IRS added information, including an "OFFICIAL USE ONLY" stamp. The information revealed was particularly explosive because it showed a $10,000 donation from a Mitt Romney connected political action committee, Free and Strong America PAC, as well as the names of 49 other significant donors to NOM.
If true, this is a very serious situation as it suggests someone inside the IRS has decided to leak confidential taxpayer information, almost certainly for political reasons. Yet there has been surprisingly little if any news coverage of this story, other than in the tax trade press (Tax Notes Today (subscription required)) and a blog entry at the Weekly Standard. While media bias with respect to coverage of the same-sex marriage debate could be the explanation, another possibility is that despite much rhetoric about the importance of taxpayer privacy, in the age of Facebook and Twitter people view such privacy as much less important - particularly when it comes to donations to charities - than is generally assumed.
April 19, 2012
Correlation Between Nonprofit Governance and Tax-Exempt Compliance
In her remarks to the Georgetown University Law Center program on Representing and Managing Tax-Exempt Organizations, IRS Exempt Organizations Director Lois Lerner discussed the findings of an IRS study of its governance checksheet, which is comprised of a list of questions used by IRS agents to determine the governance practices of an exempt organization. In October 2009, IRS agents began completing the checksheet at the completion of every public charity examination. The result is over 1300 checksheets that were examined as part of the study.
The study's analysis found "a statistically significant correlation between questions related to some governance practices and tax compliance." The correlative questions are, in Lerner's words:
1. Organizations with a written mission statement are more likely to be compliant;
2. Organizations that always use comparability data when making compensation decisions are more likely to be compliant;
3. Organizations with procedures in place for the proper use of charitable assets are more likely to be compliant; and
4. Organizations where the 990 was reviewed by the entire board of directors are more likely to be compliant. This is an important point and one I'd like to highlight. It indicates that having your entire board engaged in what is being reported on the 990 is not only helpful, but it correlates to better compliance.
Lerner also stated that "[o]n the flip side, among the organizations we examined, we saw that those that said control was concentrated in one individual, or in a small, select group of individuals, were less likely to be tax compliant."
Diversion of Assets Initiative: Lerner also announced a new audit initiative focusing on tax-exempts that divert their assets for their own use or for uses not in furtherance of their charitable purposes. Lerner reported that approximately $170 million in assets were diverted in instances involving theft, embezzlement, or Ponzi schemes. With respect to 82 organizations, civil or criminal charges were brought against the responsible party. The charges were typically pursued by the organizations themselves or local authorities, not the IRS. The IRS compiled this information from Forms 990 as well as the internet and other publicly-available information.
(For additional discussion: Daily Tax Report)
Prompt Action by Nonprofit Board Members Key to Avoiding Fiduciary Liability
As reported by the Daily Tax Report, at a Georgetown University Law Center program yesterday on Nonprofit Governance, Missouri Attorney General Bob Carlson provided simple advice - nonprofit boards can avoid potential legal liability for a breach of fidicuary duties if their reaction to such breach "is quick and shows immediate action." Carlson provided the example of a nonprofit executive director that failed to share financial information with the board of the directors, resulting in the board being completely unaware of the organization's near collapse. Upon learning of the dire financial status of the organization, the board immediately fired the executive director, installed an interim director, “and essentially righted the ship on the fly, so the organization did not go under.” Their prompt reaction, opined Carlson, prevented them from being sued. Carlson stated that he typically gives Board members the opportunity to correct a fiduciary problem, and only pursues lawsuits if there is not a sufficient response.
Along with IRS Exempt Organizations Director Lois Lerner, Carlson advised erring on the side of transparency, with both officials providing examples of items that nonprofits should considered posting to their websites: financial statements, executive compensation, and the minutes of meetings. He believes that more transparency ultimately leads to better fundraising ability, because donors often complain about their lack of knowledge with respect to the use of their donations. Both Carlson and Lerner agreed that recruiting and retaining "engaged" board members is essential to smooth operations and avoidance of trouble. In addition, board knowledge of its governance responsibilities leads to overall better decisionmaking.
NOTE: Lerner advised that the IRS will release the preliminary results of its study of governance on April 19, 2012.
IRS Issues Proposed Regulations on Program-Related Investments
As reported by the Daily Tax Report, the Internal Revenue Service issued proposed regulations on private foundations' program-related investments (PRIs). Under the proposed rules, more private foundations' investments will qualify as PRIs, thus avoiding the §4944 excise tax. Under §4944, a private foundation's investments may trigger the excise tax if they jeopardize the foundation's ability to implement its exempt purposes. Accordingly, the proposed regulations provide a broader range of investments that would not be considered as jeopardizing. The proposed regulations do not amend or modify the existing §53.4944-3(b) regulations, but add nine new examples that "illustrate that a wider range of investments qualify as PRIs."
In the explanation of the new rules, the IRS states the following:
[A] PRI may accomplish a variety of charitable purposes, such as advancing science, combatting environmental deterioration, and promoting the arts. Several examples also demonstrate that an investment that funds activities in one or more foreign countries, including investments that alleviate the impact of a natural disaster or that fund educational programs for poor individuals, may further the accomplishment of charitable purposes and qualify as a PRI. One example illustrates that the existence of a high potential rate of return on an investment does not, by itself, prevent the investment from qualifying as a PRI. Another example illustrates that a private foundation's acceptance of an equity position in conjunction with making a loan does not necessarily prevent the investment from qualifying as a PRI, and two examples illustrate that a private foundation's provision of credit enhancement can qualify as a PRI.