Recent comments regarding insufficient guidance addressing federal tax consequences of L3Cs were addressed on July 8 by former IRS EO Director Marc Owens, who disagreed that existing guidance is insufficient. L3Cs are a new type of part-exempt, part for-profit organization in which private foundations might like to invest. LC3s are different from normal LLCs in that their main mission is charitable, and they only secondarily exist to make a profit. An investment in an L3C qualifies, for a foundation, as a program-related investment (PRI). The IRS has had concerns with L3Cs and has cautioned practitioners to be careful about investing in the organizations since no one at the federal level yet has signed off on them. Specifically, the IRS is concerned with Section 4944 jeopardy investment rules for exempt organizations. However, according to Marc Owens, while the IRS has not issued a specific ruling analyzing whether a foundation’s investment in an L3C qualifies as a PRI, the IRS long has approved foundation investment in for-profit entities, including LLCs, as PRIs where the entity satisfied the PRI requirements. The IRS jeopardy investment rules in Section 4944 attempt to ensure that the way private foundations operate will not interfere with their charitable mission. Under Section 4944, a foundation and its managers may be subject to a 10 percent excise tax on investments if the managers fail to exercise ordinary business care and prudence in providing for the foundations’ financial needs. While existing IRS authorities do not reference the L3C by name, Owens says they are helpful nonetheless in analyzing the federal tax consequences of charitable investments in entities that are similar to L3Cs. One such example is Rev. Rul. 2004-51.