I 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Philanthropic Facilitation Act’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 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. 


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Sec. 7. Regulations. 

Sec. 8. Effective date. 

1 SEC. 2. FACILITATION OF PROGRAM-RELATED INVEST2 MENTS. 

3 Subsection (c) of section 4944 of the Internal Rev4 enue Code of 1986 is amended to read as follows: 

5 ‘‘(c) PROGRAM RELATED INVESTMENTS.— 

6 ‘‘(1) TREATMENT OF PROGRAM RELATED IN7 VESTMENTS.—For purposes of this subchapter, pro8 gram-related investments— 

9 ‘‘(A) are not investments which jeopardize 

10 the carrying out of one or more purposes de11 scribed in section 170(c)(2)(B), 

12 ‘‘(B) are not business holdings under sec13 tion 4943, and 

14 ‘‘(C) may be qualifying distributions under 

15 section 4942. 

16 ‘‘(2) PROGRAM-RELATED INVESTMENTS DE17 FINED.— 

18 ‘‘(A) IN GENERAL.—For purposes of this 

19 subchapter and chapter 61, an investment made 

20 by a private foundation constitutes a program21 related investment if— 

22 ‘‘(i) the primary purpose of the invest23 ment is to accomplish one or more of the 

24 purposes described in section 170(c)(2)(B), 


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1 ‘‘(ii) no significant purpose of the in2 vestment is the production of income or 

3 the appreciation of property, and 

4 ‘‘(iii) no purpose of the investment is 

5 to accomplish one or more of the purposes 

6 described in section 170(c)(2)(D). 

7 ‘‘(B) SPECIAL RULES.—For purposes of 

8 subparagraph (A)— 

9 ‘‘(i) determinations of whether an in10 vestment qualifies as a program-related in11 vestment shall be based on consideration of 

12 all relevant facts and circumstances, and 

13 ‘‘(ii) the fact that the entity produces 

14 significant income or capital appreciation 

15 shall not, in the absence of other factors, 

16 be conclusive evidence of a significant pur17 pose involving the production of income or 

18 the appreciation of property. 

19 ‘‘(3) SAFE HARBOR DETERMINATIONS.—The 

20 Secretary shall establish a procedure which shall be 

21 substantially similar to the processes for recognition 

22 of exemption under section 501(a) or 4945(g) and 

23 under which an entity seeking to receive program-re24 lated investments may petition the Secretary for a 

25 determination that, based on consideration of all relVerDate Mar 15 2010 00:18 Nov 16, 2011 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3420.IH H3420

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1 evant facts and circumstances, investments by pri2 vate foundations in such entity will be program-re3 lated investments meeting the requirements of para4 graph (2). Under this procedure, the Secretary shall 

5 rule on all requests within 120 days of submission. 

6 ‘‘(4) EFFECT OF DETERMINATION.—Once a de7 termination has been made that investments in an 

8 entity qualify as program-related investments, orga9 nizations making such investments shall be entitled 

10 to rely on the determination, unless and until the 

11 Secretary publishes notice of revocation of the deter12 mination. 

13 ‘‘(5) VOLUNTARY NATURE OF PROCESS.—Enti14 ties seeking program-related investments are not re15 quired to seek a determination under paragraph (3), 

16 and the absence of such a determination shall not 

17 affect the ability of a private foundation to make a 

18 program-related investment based on its own deter19 mination that the investment qualifies as a program20 related investment. 

21 ‘‘(6) ORGANIZATIONS TREATED AS PRIVATE

22 FOUNDATIONS.—For purposes of this subsection and 

23 section 6104A, all references to private foundations 

24 include organizations that are treated as private 

25 foundations under any of the provisions of sections 


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1 4940 through 4948, inclusive, whether created under 

2 state law or the law of any federally-recognized 

3 tribe.’’. 

4 SEC. 3. DECLARATORY JUDGMENT REMEDY. 

5 Paragraph (1) of section 7428(a) of the Internal Rev6 enue Code of 1986 is amended by striking ‘‘or’’ at the 

7 end of subparagraph (C) and by adding after subpara8 graph (D) the following new subparagraph: 

9 ‘‘(E) with respect to whether investments 

10 in an entity are program-related investments 

11 (as described in section 4944(c)(2)), or’’. 

12 SEC. 4. INFORMATION RETURNS. 

13 Part III of subchapter A of chapter 61 of the Internal 

14 Revenue Code of 1986 is amended by inserting after sec15 tion 6033 the following new section: 

16 ‘‘SEC. 6033A. INFORMATION REPORTING BY FOR-PROFIT 

17 ORGANIZATIONS RECEIVING PROGRAM-RE18 LATED INVESTMENTS. 

19 ‘‘(a) ORGANIZATIONS REQUIRED TO FILE.—If in20 vestments in an entity have been determined to be pro21 gram-related investments through a determination of the 

22 Internal Revenue Service pursuant to section 4944(c)(3) 

23 or by a determination of a court pursuant to section 

24 7428(a), the entity shall, in addition to any other applica25 ble filing obligations, file an annual return providing the 


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1 information specified in subsection (b) for any taxable 

2 year in which it receives or retains one or more program3 related investments (as defined in section 4944(c)(2)). 

4 ‘‘(b) REQUIRED REPORTING.—The return described 

5 in subsection (a) shall provide, in such manner and at 

6 such time as the Secretary may by forms or regulations 

7 prescribe, the following information— 

8 ‘‘(1) the organization’s gross income for the 

9 year, 

10 ‘‘(2) its expenses attributable to such income 

11 incurred within the year, 

12 ‘‘(3) its disbursements within the year for one 

13 or more purposes described in section 170(c)(2)(B), 

14 together with a narrative statement describing the 

15 results obtained from the use of those assets for 

16 such one or more purposes described in section 

17 170(c)(2)(B), 

18 ‘‘(4) a balance sheet showing its assets, liabil19 ities, and net worth as of the beginning and end of 

20 such year, 

21 ‘‘(5) the names and addresses of all private 

22 foundations holding program-related investments in 

23 the organization, 

24 ‘‘(6) a statement of the portion of its liabilities 

25 and net worth that represent capitalization obtained 


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1 by means of program-related investments as of the 

2 beginning and end of such year, 

3 ‘‘(7) a statement of any interest, dividends, or 

4 other distributions paid with respect to any pro5 gram-related investments during the year, and 

6 ‘‘(8) such other information as may be nec7 essary for the return described in subsection (a) to 

8 satisfy the annual financial reporting required by the 

9 expenditure responsibility rules pursuant to the reg10 ulations under section 4945 or as the Secretary may 

11 by forms or regulations prescribe.’’. 

12 SEC. 5. PUBLICITY OF INFORMATION. 

13 Subchapter B of chapter 61 of the Internal Revenue 

14 Code of 1986 is amended by inserting after section 6104 

15 the following new section: 

16 ‘‘SEC. 6104A. PUBLICITY OF INFORMATION REGARDING OR17 GANIZATIONS RECEIVING PROGRAM-RE18 LATED INVESTMENTS. 

19 ‘‘(a) INSPECTION OF PETITIONS FOR DETERMINA20 TION OF PROGRAM-RELATED INVESTMENT STATUS.—If 

21 an entity seeks a determination pursuant to section 

22 4944(c)(3) that investments by private foundations in 

23 such organization will be program-related investments, the 

24 petition seeking such a determination, together with any 

25 documents submitted in support of such petition and any 


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1 determination or other document issued by the Internal 

2 Revenue Service with respect to such petition, shall be 

3 open to public inspection at the national office of the In4 ternal Revenue Service. 

5 ‘‘(b) INSPECTION OF ANNUAL INFORMATION RE6 TURNS.—The information required to be furnished by sec7 tion 6033A, together with the names and addresses of 

8 such entity, shall be made available to the public at such 

9 times and in such places as the Secretary may prescribe. 

10 ‘‘(c) PUBLIC INSPECTION OF PETITIONS AND AN11 NUAL INFORMATION RETURNS.—Any entity that receives 

12 a determination from the Internal Revenue Service that 

13 private foundation investments shall be program-related 

14 investments pursuant to section 4944(c)(3) shall make 

15 copies available at the organization’s principal office, dur16 ing regular business hours, of the petition for such deter17 mination (together with supporting materials provided 

18 with the petition and documents issued by the Internal 

19 Revenue Service with respect to such petition), as well as 

20 the annual returns required by section 6033A filed by such 

21 organization. Upon request of an individual made at such 

22 principal office, copies of such petition materials and an23 nual reports shall be provided to such individual without 

24 charge other than a reasonable fee for any reproduction 

25 and mailing costs. The inspection and duplication rights 


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1 granted in this subsection shall apply to an annual return 

2 only during the three-year period beginning on the last 

3 day prescribed for filing such return (determined with re4 gard to any extension of time for filing). 

5 ‘‘(d) LIMITATION ON PROVIDING COPIES.—Para6 graph (c) shall not apply to any request if, in accordance 

7 with regulations promulgated by the Secretary, the entity 

8 has made the requested documents widely available, or the 

9 Secretary determines, upon application by an entity, that 

10 such request is part of a harassment campaign and that 

11 compliance with such request is not in the public inter12 est.’’. 

13 SEC. 6. CONFORMING AMENDMENTS. 

14 (a) CONFORMING CHANGE TO SECTION 501(n).— 

15 Paragraph (4)(A) of section 501(n) of the Internal Rev16 enue Code of 1986 is amended by inserting ‘‘paragraph 

17 (2) of’’ before ‘‘section 4944(c).’’ 

18 (b) CONFORMING CHANGE TO SECTION 514(b).— 

19 Paragraph (1) of section 514(b) of the Internal Revenue 

20 Code of 1986 is amended by redesignating subparagraphs 

21 (D) and (E) as subparagraphs (E) and (F) and by insert22 ing after subparagraph (C) the following new subpara23 graph: 

24 ‘‘(D) any property owned or treated as 

25 owned by a private foundation by virtue of its 


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1 having made an investment in an entity that 

2 has received a determination from the Internal 

3 Revenue Service pursuant to section 

4 4944(c)(3), or by a court pursuant to section 

5 7428(a), that such investments in such entity 

6 qualify as program-related investments;’’. 

7 (c) CONFORMING CHANGE TO SECTION 4943(d).— 

8 Paragraph (3) of section 4943(d) of the Internal Revenue 

9 Code of 1986 is amended by striking ‘‘or’’ at the end of 

10 subparagraph (A), by redesignating subparagraph (B) as 

11 subparagraph (C) and by inserting after subparagraph (A) 

12 the following new subparagraph: 

13 ‘‘(B) any program-related investment, as 

14 defined in section 4944(c)(2), or’’. 

15 SEC. 7. REGULATIONS. 

16 The Secretary of the Treasury shall, not later than 

17 1 year after the date of the enactment of this Act, amend 

18 any applicable regulations as may be necessary or appro19 priate to implement any amendments contained in this Act 

20 or to carry out the purposes of this Act, including pro21 viding additional examples of qualifying program-related 

22 investments. 


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1 SEC. 8. EFFECTIVE DATE. 

2 The amendments made by this Act shall apply to in3 vestments made after the date of the enactment of this 

4 Act in taxable years ending after such date. 

Æ 


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