Philanthropic Facilitation Act

II 116TH CONGRESS 1ST SESSION S. 2756 To amend the Internal Revenue Code of 1986 to facilitate program-related investments by private foundations. IN THE SENATE OF THE UNITED STATES OCTOBER 31, 2019 Mr. GARDNER (for himself and Mr. PETERS) introduced the following bill; which was read twice and referred to the Committee on Finance 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 Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Philanthropic Facilitation Act’’. 5 (b) TABLE OF CONTENTS.—The table of contents for 6 this Act is as follows: 7 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. VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 2756 IS Sec. 7. Regulations. Sec. 8. Effective date. SEC. 2. FACILITATION OF PROGRAM-RELATED INVEST- 1 MENTS. 2 Subsection (c) of section 4944 of the Internal Rev- 3 enue Code of 1986 is amended to read as follows: 4 ‘‘(c) PROGRAM RELATED INVESTMENTS.— 5 ‘‘(1) TREATMENT OF PROGRAM RELATED IN- 6 VESTMENTS.—For purposes of this subchapter, pro- 7 gram-related investments— 8 ‘‘(A) are not investments which jeopardize 9 the carrying out of one or more purposes de- 10 scribed in section 170(c)(2)(B), 11 ‘‘(B) are not business holdings under sec- 12 tion 4943, and 13 ‘‘(C) may be qualifying distributions under 14 section 4942. 15 ‘‘(2) PROGRAM-RELATED INVESTMENTS DE- 16 FINED.— 17 ‘‘(A) IN GENERAL.—For purposes of this 18 subchapter and chapter 61, an investment made 19 by a private foundation constitutes a program- 20 related investment if— 21 ‘‘(i) the primary purpose of the invest- 22 ment is to accomplish one or more of the 23 purposes described in section 170(c)(2)(B), 24 VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 2756 IS ‘‘(ii) no significant purpose of the in- 1 vestment is the production of income or 2 the appreciation of property, and 3 ‘‘(iii) no purpose of the investment is 4 to accomplish one or more of the purposes 5 described in section 170(c)(2)(D). 6 ‘‘(B) SPECIAL RULES.—For purposes of 7 subparagraph (A)— 8 ‘‘(i) determinations of whether an in- 9 vestment qualifies as a program-related in- 10 vestment shall be based on consideration of 11 all relevant facts and circumstances, and 12 ‘‘(ii) the fact that the entity produces 13 significant income or capital appreciation 14 shall not, in the absence of other factors, 15 be conclusive evidence of a significant pur- 16 pose involving the production of income or 17 the appreciation of property. 18 ‘‘(3) SAFE HARBOR DETERMINATIONS.—The 19 Secretary shall establish a procedure which shall be 20 substantially similar to the processes for recognition 21 of exemption under section 501(a) or 4945(g) and 22 under which an entity seeking to receive program-re- 23 lated investments may petition the Secretary for a 24 determination that, based on consideration of all rel- 25 VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 2756 IS evant facts and circumstances, investments by pri- 1 vate foundations in such entity will be program-re- 2 lated investments meeting the requirements of para- 3 graph (2). Under this procedure, the Secretary shall 4 rule on all requests within 120 days of submission. 5 ‘‘(4) EFFECT OF DETERMINATION.—Once a de- 6 termination has been made that investments in an 7 entity qualify as program-related investments, orga- 8 nizations making such investments shall be entitled 9 to rely on the determination, unless and until the 10 Secretary publishes notice of revocation of the deter- 11 mination. 12 ‘‘(5) VOLUNTARY NATURE OF PROCESS.—Enti- 13 ties seeking program-related investments are not re- 14 quired to seek a determination under paragraph (3), 15 and the absence of such a determination shall not 16 affect the ability of a private foundation to make a 17 program-related investment based on its own deter- 18 mination that the investment qualifies as a program- 19 related investment. 20 ‘‘(6) ORGANIZATIONS TREATED AS PRIVATE 21 FOUNDATIONS.—For purposes of this subsection and 22 section 6104A, all references to private foundations 23 include organizations that are treated as private 24 foundations under any of the provisions of sections 25 VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 2756 IS 4940 through 4948, inclusive, whether created under 1 State law or the law of any federally recognized 2 tribe.’’. 3 SEC. 3. DECLARATORY JUDGMENT REMEDY. 4 Paragraph (1) of section 7428(a) of the Internal Rev- 5 enue Code of 1986 is amended by striking ‘‘or’’ at the 6 end of subparagraph (D) and by adding after subpara- 7 graph (E) the following new subparagraph: 8 ‘‘(F) with respect to whether investments 9 in an entity are program-related investments 10 (as described in section 4944(c)(2)), or’’. 11 SEC. 4. INFORMATION RETURNS. 12 Part III of subchapter A of chapter 61 of the Internal 13 Revenue Code of 1986 is amended by inserting after sec- 14 tion 6033 the following new section: 15 ‘‘SEC. 6033A. INFORMATION REPORTING BY FOR-PROFIT 16 ORGANIZATIONS RECEIVING PROGRAM-RE- 17 LATED INVESTMENTS. 18 ‘‘(a) ORGANIZATIONS REQUIRED TO FILE.—If in- 19 vestments in an entity have been determined to be pro- 20 gram-related investments through a determination of the 21 Internal Revenue Service pursuant to section 4944(c)(3) 22 or by a determination of a court pursuant to section 23 7428(a), the entity shall, in addition to any other applica- 24 ble filing obligations, file an annual return providing the 25 VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 2756 IS information specified in subsection (b) for any taxable 1 year in which it receives or retains one or more program- 2 related investments (as defined in section 4944(c)(2)). 3 ‘‘(b) REQUIRED REPORTING.—The return described 4 in subsection (a) shall provide, in such manner and at 5 such time as the Secretary may by forms or regulations 6 prescribe, the following information— 7 ‘‘(1) the organization’s gross income for the 8 year, 9 ‘‘(2) its expenses attributable to such income 10 incurred within the year, 11 ‘‘(3) its disbursements within the year for one 12 or more purposes described in section 170(c)(2)(B), 13 together with a narrative statement describing the 14 results obtained from the use of those assets for 15 such one or more purposes described in section 16 170(c)(2)(B), 17 ‘‘(4) a balance sheet showing its assets, liabil- 18 ities, and net worth as of the beginning and end of 19 such year, 20 ‘‘(5) the names and addresses of all private 21 foundations holding program-related investments in 22 the organization, 23 ‘‘(6) a statement of the portion of its liabilities 24 and net worth that represent capitalization obtained 25 VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 2756 IS by means of program-related investments as of the 1 beginning and end of such year, 2 ‘‘(7) a statement of any interest, dividends, or 3 other distributions paid with respect to any pro- 4 gram-related investments during the year, and 5 ‘‘(8) such other information as may be nec- 6 essary for the return described in subsection (a) to 7 satisfy the annual financial reporting required by the 8 expenditure responsibility rules pursuant to the reg- 9 ulations under section 4945 or as the Secretary may 10 by forms or regulations prescribe.’’. 11 SEC. 5. PUBLICITY OF INFORMATION. 12 Subchapter B of chapter 61 of the Internal Revenue 13 Code of 1986 is amended by inserting after section 6104 14 the following new section: 15 ‘‘SEC. 6104A. PUBLICITY OF INFORMATION REGARDING OR- 16 GANIZATIONS RECEIVING PROGRAM-RE- 17 LATED INVESTMENTS. 18 ‘‘(a) INSPECTION OF PETITIONS FOR DETERMINA- 19 TION OF PROGRAM-RELATED INVESTMENT STATUS.—If 20 an entity seeks a determination pursuant to section 21 4944(c)(3) that investments by private foundations in 22 such organization will be program-related investments, the 23 petition seeking such a determination, together with any 24 documents submitted in support of such petition and any 25 VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 2756 IS determination or other document issued by the Internal 1 Revenue Service with respect to such petition, shall be 2 open to public inspection at the national office of the In- 3 ternal Revenue Service. 4 ‘‘(b) INSPECTION OF ANNUAL INFORMATION RE- 5 TURNS.—The information required to be furnished by sec- 6 tion 6033A, together with the names and addresses of 7 such entity, shall be made available to the public at such 8 times and in such places as the Secretary may prescribe. 9 ‘‘(c) PUBLIC INSPECTION OF PETITIONS AND AN- 10 NUAL INFORMATION RETURNS.—Any entity that receives 11 a determination from the Internal Revenue Service that 12 private foundation investments shall be program-related 13 investments pursuant to section 4944(c)(3) shall make 14 copies available at the organization’s principal office, dur- 15 ing regular business hours, of the petition for such deter- 16 mination (together with supporting materials provided 17 with the petition and documents issued by the Internal 18 Revenue Service with respect to such petition), as well as 19 the annual returns required by section 6033A filed by such 20 organization. Upon request of an individual made at such 21 principal office, copies of such petition materials and an- 22 nual reports shall be provided to such individual without 23 charge other than a reasonable fee for any reproduction 24 and mailing costs. The inspection and duplication rights 25 VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 2756 IS granted in this subsection shall apply to an annual return 1 only during the three-year period beginning on the last 2 day prescribed for filing such return (determined with re- 3 gard to any extension of time for filing). 4 ‘‘(d) LIMITATION ON PROVIDING COPIES.—Para- 5 graph (c) shall not apply to any request if, in accordance 6 with regulations promulgated by the Secretary, the entity 7 has made the requested documents widely available, or the 8 Secretary determines, upon application by an entity, that 9 such request is part of a harassment campaign and that 10 compliance with such request is not in the public inter- 11 est.’’. 12 SEC. 6. CONFORMING AMENDMENTS. 13 (a) CONFORMING CHANGE TO SECTION 501(n).— 14 Paragraph (4)(A) of section 501(n) of the Internal Rev- 15 enue Code of 1986 is amended by inserting ‘‘paragraph 16 (2) of’’ before ‘‘section 4944(c).’’ 17 (b) CONFORMING CHANGES TO SECTION 514.—Sec- 18 tion 514 of the Internal Revenue Code of 1986 is amend- 19 ed— 20 (1) in subsection (b)— 21 (A) in paragraph (1), by redesignating 22 subparagraphs (D) and (E) as subparagraphs 23 (E) and (F), respectively, and by inserting after 24 VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS 10 •S 2756 IS subparagraph (C) the following new subpara- 1 graph: 2 ‘‘(D) any property owned or treated as 3 owned by a private foundation by virtue of its 4 having made an investment in an entity that 5 has received a determination from the Internal 6 Revenue Service pursuant to section 7 4944(c)(3), or by a court pursuant to section 8 7428(a), that such investments in such entity 9 qualify as program-related investments;’’, and 10 (B) in paragraph (2), by striking ‘‘(D)’’ 11 and inserting ‘‘(E)’’, and 12 (2) in subsection (e), by striking ‘‘(D)’’ and in- 13 serting ‘‘(E)’’. 14 (c) CONFORMING CHANGE TO SECTION 4943(d).— 15 Paragraph (3) of section 4943(d) of the Internal Revenue 16 Code of 1986 is amended— 17 (1) by striking ‘‘or’’ at the end of subparagraph 18 (A), 19 (2) by redesignating subparagraph (B) as sub- 20 paragraph (C), 21 (3) by inserting after subparagraph (A) the fol- 22 lowing new subparagraph: 23 ‘‘(B) any program-related investment, as 24 defined in section 4944(c)(2), or’’, and 25 VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS 11 •S 2756 IS (4) by striking ‘‘subparagraph (B)’’ and insert- 1 ing ‘‘subparagraph (C)’’. 2 SEC. 7. REGULATIONS. 3 The Secretary of the Treasury shall, not later than 4 1 year after the date of the enactment of this Act, amend 5 any applicable regulations as may be necessary or appro- 6 priate to implement any amendments contained in this Act 7 or to carry out the purposes of this Act, including pro- 8 viding additional examples of qualifying program-related 9 investments. 10 SEC. 8. EFFECTIVE DATE. 11 The amendments made by this Act shall apply to in- 12 vestments made after the date of the enactment of this 13 Act in taxable years ending after such date. 14 Æ VerDate Sep 11 2014 21:56 Nov 02, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6301 E:\BILLS\S2756.IS S2756 pamtmann on DSKBC07HB2PROD with BILLS