Program-Related Equity Investments

Furthering Your Charitable Purpose by Investing in For-Profit Entities

Typically, a private foundation makes grants to further its charitable work and makes investments to increase or maintain the size of its endowment. Increasingly, however, foundations are breaking down the wall between their endowments and their grant dollars, employing both to further their charitable work.

Program-related investments (PRIs) have elements of both investments and grants. They also have unique advantages. A PRI is a qualifying distribution that counts toward meeting the foundation’s annual minimum distribution requirement. However, whereas grant dollars go out the door never to return, PRI dollars are generally recovered in part or in whole, and may even earn some return for the foundation in the form of interest or appreciation.

PRIs are not subject to the normal prudent investment standards. For legal purposes, PRIs are considered to be more akin to grants because they are made primarily to further a charitable purpose without concern for return on investment. For this reason, PRIs do not have to be prudent, and they are not subject to an excise tax for jeopardizing investments.

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