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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3420 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 3420

   To amend the Internal Revenue Code of 1986 to facilitate program-
              related investments by private foundations.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           November 14, 2011

 Mr. Schock (for himself and Mr. Polis) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL

 
   To amend the Internal Revenue Code of 1986 to facilitate program-
              related investments by private foundations.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Philanthropic 
Facilitation Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; Table of Contents.
Sec. 2. Facilitation of program-related investments.
Sec. 3. Declaratory judgment remedy.
Sec. 4. Information returns.
Sec. 5. Publicity of information.
Sec. 6. Conforming amendments.
Sec. 7. Regulations.
Sec. 8. Effective date.

SEC. 2. FACILITATION OF PROGRAM-RELATED INVESTMENTS.

    Subsection (c) of section 4944 of the Internal Revenue Code of 1986 
is amended to read as follows:
    ``(c) Program Related Investments.--
            ``(1) Treatment of program related investments.--For 
        purposes of this subchapter, program-related investments--
                    ``(A) are not investments which jeopardize the 
                carrying out of one or more purposes described in 
                section 170(c)(2)(B),
                    ``(B) are not business holdings under section 4943, 
                and
                    ``(C) may be qualifying distributions under section 
                4942.
            ``(2) Program-related investments defined.--
                    ``(A) In general.--For purposes of this subchapter 
                and chapter 61, an investment made by a private 
                foundation constitutes a program-related investment 
                if--
                            ``(i) the primary purpose of the investment 
                        is to accomplish one or more of the purposes 
                        described in section 170(c)(2)(B),
                            ``(ii) no significant purpose of the 
                        investment is the production of income or the 
                        appreciation of property, and
                            ``(iii) no purpose of the investment is to 
                        accomplish one or more of the purposes 
                        described in section 170(c)(2)(D).
                    ``(B) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) determinations of whether an 
                        investment qualifies as a program-related 
                        investment shall be based on consideration of 
                        all relevant facts and circumstances, and
                            ``(ii) the fact that the entity produces 
                        significant income or capital appreciation 
                        shall not, in the absence of other factors, be 
                        conclusive evidence of a significant purpose 
                        involving the production of income or the 
                        appreciation of property.
            ``(3) Safe harbor determinations.--The Secretary shall 
        establish a procedure which shall be substantially similar to 
        the processes for recognition of exemption under section 501(a) 
        or 4945(g) and under which an entity seeking to receive 
        program-related investments may petition the Secretary for a 
        determination that, based on consideration of all relevant 
        facts and circumstances, investments by private foundations in 
        such entity will be program-related investments meeting the 
        requirements of paragraph (2). Under this procedure, the 
        Secretary shall rule on all requests within 120 days of 
        submission.
            ``(4) Effect of determination.--Once a determination has 
        been made that investments in an entity qualify as program-
        related investments, organizations making such investments 
        shall be entitled to rely on the determination, unless and 
        until the Secretary publishes notice of revocation of the 
        determination.
            ``(5) Voluntary nature of process.--Entities seeking 
        program-related investments are not required to seek a 
        determination under paragraph (3), and the absence of such a 
        determination shall not affect the ability of a private 
        foundation to make a program-related investment based on its 
        own determination that the investment qualifies as a program-
        related investment.
            ``(6) Organizations treated as private foundations.--For 
        purposes of this subsection and section 6104A, all references 
        to private foundations include organizations that are treated 
        as private foundations under any of the provisions of sections 
        4940 through 4948, inclusive, whether created under state law 
        or the law of any federally-recognized tribe.''.

SEC. 3. DECLARATORY JUDGMENT REMEDY.

    Paragraph (1) of section 7428(a) of the Internal Revenue Code of 
1986 is amended by striking ``or'' at the end of subparagraph (C) and 
by adding after subparagraph (D) the following new subparagraph:
                    ``(E) with respect to whether investments in an 
                entity are program-related investments (as described in 
                section 4944(c)(2)), or''.

SEC. 4. INFORMATION RETURNS.

    Part III of subchapter A of chapter 61 of the Internal Revenue Code 
of 1986 is amended by inserting after section 6033 the following new 
section:

``SEC. 6033A. INFORMATION REPORTING BY FOR-PROFIT ORGANIZATIONS 
              RECEIVING PROGRAM-RELATED INVESTMENTS.

    ``(a) Organizations Required To File.--If investments in an entity 
have been determined to be program-related investments through a 
determination of the Internal Revenue Service pursuant to section 
4944(c)(3) or by a determination of a court pursuant to section 
7428(a), the entity shall, in addition to any other applicable filing 
obligations, file an annual return providing the information specified 
in subsection (b) for any taxable year in which it receives or retains 
one or more program-related investments (as defined in section 
4944(c)(2)).
    ``(b) Required Reporting.--The return described in subsection (a) 
shall provide, in such manner and at such time as the Secretary may by 
forms or regulations prescribe, the following information--
            ``(1) the organization's gross income for the year,
            ``(2) its expenses attributable to such income incurred 
        within the year,
            ``(3) its disbursements within the year for one or more 
        purposes described in section 170(c)(2)(B), together with a 
        narrative statement describing the results obtained from the 
        use of those assets for such one or more purposes described in 
        section 170(c)(2)(B),
            ``(4) a balance sheet showing its assets, liabilities, and 
        net worth as of the beginning and end of such year,
            ``(5) the names and addresses of all private foundations 
        holding program-related investments in the organization,
            ``(6) a statement of the portion of its liabilities and net 
        worth that represent capitalization obtained by means of 
        program-related investments as of the beginning and end of such 
        year,
            ``(7) a statement of any interest, dividends, or other 
        distributions paid with respect to any program-related 
        investments during the year, and
            ``(8) such other information as may be necessary for the 
        return described in subsection (a) to satisfy the annual 
        financial reporting required by the expenditure responsibility 
        rules pursuant to the regulations under section 4945 or as the 
        Secretary may by forms or regulations prescribe.''.

SEC. 5. PUBLICITY OF INFORMATION.

    Subchapter B of chapter 61 of the Internal Revenue Code of 1986 is 
amended by inserting after section 6104 the following new section:

``SEC. 6104A. PUBLICITY OF INFORMATION REGARDING ORGANIZATIONS 
              RECEIVING PROGRAM-RELATED INVESTMENTS.

    ``(a) Inspection of Petitions for Determination of Program-Related 
Investment Status.--If an entity seeks a determination pursuant to 
section 4944(c)(3) that investments by private foundations in such 
organization will be program-related investments, the petition seeking 
such a determination, together with any documents submitted in support 
of such petition and any determination or other document issued by the 
Internal Revenue Service with respect to such petition, shall be open 
to public inspection at the national office of the Internal Revenue 
Service.
    ``(b) Inspection of Annual Information Returns.--The information 
required to be furnished by section 6033A, together with the names and 
addresses of such entity, shall be made available to the public at such 
times and in such places as the Secretary may prescribe.
    ``(c) Public Inspection of Petitions and Annual Information 
Returns.--Any entity that receives a determination from the Internal 
Revenue Service that private foundation investments shall be program-
related investments pursuant to section 4944(c)(3) shall make copies 
available at the organization's principal office, during regular 
business hours, of the petition for such determination (together with 
supporting materials provided with the petition and documents issued by 
the Internal Revenue Service with respect to such petition), as well as 
the annual returns required by section 6033A filed by such 
organization. Upon request of an individual made at such principal 
office, copies of such petition materials and annual reports shall be 
provided to such individual without charge other than a reasonable fee 
for any reproduction and mailing costs. The inspection and duplication 
rights granted in this subsection shall apply to an annual return only 
during the three-year period beginning on the last day prescribed for 
filing such return (determined with regard to any extension of time for 
filing).
    ``(d) Limitation on Providing Copies.--Paragraph (c) shall not 
apply to any request if, in accordance with regulations promulgated by 
the Secretary, the entity has made the requested documents widely 
available, or the Secretary determines, upon application by an entity, 
that such request is part of a harassment campaign and that compliance 
with such request is not in the public interest.''.

SEC. 6. CONFORMING AMENDMENTS.

    (a) Conforming Change to Section 501(n).--Paragraph (4)(A) of 
section 501(n) of the Internal Revenue Code of 1986 is amended by 
inserting ``paragraph (2) of'' before ``section 4944(c).''
    (b) Conforming Change to Section 514(b).--Paragraph (1) of section 
514(b) of the Internal Revenue Code of 1986 is amended by redesignating 
subparagraphs (D) and (E) as subparagraphs (E) and (F) and by inserting 
after subparagraph (C) the following new subparagraph:
                    ``(D) any property owned or treated as owned by a 
                private foundation by virtue of its having made an 
                investment in an entity that has received a 
                determination from the Internal Revenue Service 
                pursuant to section 4944(c)(3), or by a court pursuant 
                to section 7428(a), that such investments in such 
                entity qualify as program-related investments;''.
    (c) Conforming Change to Section 4943(d).--Paragraph (3) of section 
4943(d) of the Internal Revenue Code of 1986 is amended by striking 
``or'' at the end of subparagraph (A), by redesignating subparagraph 
(B) as subparagraph (C) and by inserting after subparagraph (A) the 
following new subparagraph:
                    ``(B) any program-related investment, as defined in 
                section 4944(c)(2), or''.

SEC. 7. REGULATIONS.

    The Secretary of the Treasury shall, not later than 1 year after 
the date of the enactment of this Act, amend any applicable regulations 
as may be necessary or appropriate to implement any amendments 
contained in this Act or to carry out the purposes of this Act, 
including providing additional examples of qualifying program-related 
investments.

SEC. 8. EFFECTIVE DATE.

    The amendments made by this Act shall apply to investments made 
after the date of the enactment of this Act in taxable years ending 
after such date.
                                 <all>
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