IRS Blesses Private Foundation Mission-Related Investing: Implications for the Charitable Sector

Publication date: 
November, 2015
Source(s): 
Davis Wright Tremaine, LLP Advisories & Blogs

The IRS has formally confirmed that private foundations may make investments that further their charitable purposes even when those investments do not qualify as permitted program-related investments (“PRIs”) under the federal tax law. This is welcome news for proponents of mission-related investing.

In Notice 2015-62, issued on Sept. 15, 2015, the IRS sought to allay concerns that a foundation that makes investments for a combination of charitable impact and financial return, rather than strictly to maximize financial return, might violate the private foundation “jeopardizing investment” rules. Under those rules, foundations and foundation managers who fail to exercise ordinary business care and prudence in managing investments may be subject to excise tax liability.

The Notice effectively gives the IRS seal of approval to the growing practice of “impact investing” or “mission-related investing,” through which private foundations use their investment assets to advance their charitable missions and pursue charitable impact and outcomes.