Today the IRS released final regulations that provide guidance to private foundations on program-related investments.  The final rules provide a series of examples illustrating investments that qualify as program-related investments and make some changes to examples provided in the 2012 proposed rules.  

For instance, Example 11 of the proposed rules involved a private foundation’s investment in a subsidiary of a drug company for the development of a vaccine to prevent a disease that predominantly affects poor individuals in developing counties.  Under the investment agreement described in the example, the subsidiary is required to distribute the vaccine to the poor individuals in developing countries at a price that is affordable to the affected population and to promptly publish its research results.  The final rules modify the example to make it clear that the subsidiary can also sell the vaccine at market value prices to those who can afford it.  The IRS notes that the modification is appropriate given that the private foundation’s primary purpose in making the investment is to fund scientific research in the public interest and no significant purpose of the investment involves the production of income or the appreciation of property.

Other modifications include the removal of language regarding the liquidation of stock in an example involving a foundation that accepts common stock in a business enterprise as part of a loan to the business.  Click here more information.