The ABC's of PRI's
Program-Related Investments (PRIs) are investments that private foundations and public charities can make to advance their charitable missions.* To be classified as a PRI, an investment must meet three requirements:
- The primary purpose is to advance the organization's exempt purpose.
- Financial return is not a significant purpose. In other words, the financial terms of the investment are "below-market."
- Influencing legislation or elections is not a purpose.
Program-Related Investments are extremely versatile. They can be structured in any form (equity, loans, guarantees, etc…), made to any type of entity (nonprofits, businesses, social businesses, government), and used to advance any approved charitable purpose an organization may adopt.
In addition to making a direct charitable impact, each PRI can earn financial returns, as long as production of income or appreciation of property is not a significant purpose of the investment. Any financial returns from a PRI get recycled and put to new charitable uses, leading to compounding charitable impact.
PRIs are not without requirements and nuance, which is why Venn is working to specialize in PRIs and share our experience and services across the entire philanthropic community. Over time, our hope is to develop economies of scale and significantly reduce the transaction costs currently associated with PRIs, allowing them to be used as regularly and creatively as grants.
* For private foundations, “Program-Related Investments” are defined by Section 4944 of the IRS Code and Treasury Regulation 53.4944-3. For public charities, program-related investments are not subject to Section 4944 of the Code or its implementing regulations, but they are still made primarily to accomplish an organization’s exempt purpose rather than to produce income and are defined separately on Schedule D of the Form 990. Venn Foundation uses the term “Program-Related Investment” broadly to include investments made by both types of charitable entities.