Private Foundations: New guidance issued regarding charitable investments

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Private foundation managers concerned about mission related investments that accept a lower rate of return in exchange for mission related goals can now rest assured these investments will not be considered a "jeopardizing investment" under section 4944 of the Internal Revenue Code.
On September 15, 2015, Notice 2015-62, 2015-39 IRB was issued to provide guidance on how that section is applied. The notice seeks to affirm investing by private foundations in a manner that allows consideration by foundation managers of both the investment return and the foundation's charitable purpose.
The notice states that, "When exercising ordinary business care and prudence in deciding whether to make an investment, foundation managers may consider all relevant facts and circumstances, including the relationship between a particular investment and the foundation's charitable purposes. Foundation managers are not required to select only investments that offer the highest rates of return, the lowest risks, or the greatest liquidity so long as the foundation managers exercise the requisite ordinary business care and prudence under the facts and circumstances prevailing at the time of the investment in making investment decisions that support, and do not jeopardize, the furtherance of the private foundation's charitable purposes."
SKR+CO Expert
Doreen Merz, CPA, Tax Partner
Doreen has been in public accounting since 2000. Her specialties include nonprofits, partnerships and corporations.