Treasury has released Final Regulations under Section 4944 of the Code providing additional guidance regarding program related investments (“PRIs”). Technically, a PRI is an investment by a private foundation (1) the primary purpose of which is to accomplish an exempt purpose, (2) no significant purpose of the investment is the production of income or the appreciation of property; and (3) no purpose of the investment is to influence legislation or to participate in, or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office. Classification as a PRI is important because it means the investment will not be considered a jeopardizing investment and the investment is included as a qualifying distribution for purposes of the foundation’s annual minimum distribution obligation.

These Final Regulations provide several new examples of investments that will be classified as PRIs. It is important to note, however, that these Final Regulations do not change or amend existing law. In other words, the Final Regulations were not necessary to reach a conclusion that any of the investments in the examples qualified as a PRI. That said, it is always useful to have additional examples illustrating investments that further an exempt purpose. In addition, the Preamble to the Final Regulations and some of the specific examples address concepts that apply beyond an analysis of PRIs, including application of the private benefit doctrine.