Final IRS regulations released this spring offer private foundations guidance on program-related investments, and narrow the definition of “jeopardizing investments” that may subject the foundation to an excise tax. Program-related investments (PRIs) are largely meant to accomplish a private foundation’s charitable aims vs. generating financial returns. Under the final regulations, though, if an investment produces significant income or capital appreciation, that alone wouldn’t disqualify the investment from being a PRI.

The regulations add nine examples to the existing rules, updating the types of investments that qualify as PRIs. The existing regulations — in effect since 1972 — have nine examples that focus on domestic investments mainly involving economically disadvantaged individuals and deteriorated urban areas.

The new examples demonstrate that PRIs can accomplish a variety of other exempt purposes, fund activities in foreign countries and earn a potentially high rate of return. They also show that such investments can include an equity position when a nonprofit is making a loan or provide credit enhancements (for example, by guaranteeing a bank loan to an exempt organization). And private foundations can now provide loans or capital to individuals or entities that aren’t tax-exempt themselves as long as the recipients are the instruments through which the foundation accomplishes its exempt activities. For more information on the new regulations, visit

For more information on the new regulations, visit https://www.irs.gov/irb/2016-19_IRB/ar08.html or give us a call, we’re here to help.