Hunton Law

Legal Counsel for Nonprofit & Tax-Exempt Organizations

Legal Counsel for Nonprofits, Foundations & Social Enterprises

Greater Assurance for Impact Investors

Four years after the Internal Revenue Service issued proposed regulations regarding program-related investments by private foundations, the regulations were finalized and published in the Federal Register on April 25, 2016.  The final regulations contain nine new examples of permissible program-related investments (PRIs) to for-profit businesses, individuals, and nonprofit organizations, adding to the nine examples that existed previously.  For a definition of a PRI, see Section 4944(c) of the Internal Revenue Code and  my journal post published on 12/31/12. 

To read the text of the Regulations, see this Internal Revenue Bulletin

The new examples of PRIs provide assurance to private foundations that a wider range of investments can qualify as PRIs.  Furthermore, the examples reduce the perception that PRIs are perilous, expensive, and appropriate only for the largest foundations that have significant resources and investment professionals and lawyers on staff.  As a consequence, we will likely see a rise in the number of smaller foundations (note that the majority of California foundations have $1-5 million in assets) participating in social enterprise funding transactions structured as PRIs.  This should come as good news for for-profit social entrepreneurs seeking funding, as impact investing represents a bridge to philanthropic funders.  


Fast Forward Accelerator for Tech Nonprofits Continues to Thrive

Earlier this month I had the pleasure of meeting the incredible teams participating in this summer’s Fast Forward Accelerator for tech nonprofits.  Cofounded in 2014 by Shannon Farley and Kevin Barenblat, Fast Forward is an accelerator designed exclusively for nonprofits using technology to improve the world. 

This year Fast Forward received three times the number of applications than in its first year, showing a deepening commitment to designing technology applied to a breadth of social justice, educational, and environmental causes. 

All of the accelerator participants use technologies to solve issues like education, health, and human rights, and are organized as nonprofit corporations.  Like other Section 501(c)(3) nonprofits, they must address issues relating to fundraising, financial sustainability, board governance, risk management, security and privacy, unrelated business income, political activities, international operations, and others.

This 2016 accelerator cohort includes:

  • CommonLit: equips educators with high-quality, standards-aligned digital literacy tools
  • Democracy Earth Foundation: incorruptible digital voting technology
  • Hack Club: platform for high schoolers to start awesome after-school coding clubs
  • Intelehealth: open-source mobile telemedicine platform for last mile health care delivery
  • arming tenants in neglectful housing situations with tech for legal empowerment
  • Learn Fresh: education game developer integrating professional sports to teach math
  • Open Media Project: live and on-demand searchable media software for governments
  • Think of Us: tech that improves the lives of foster youth and systems they are connected to
  • We The Protesters: digital tools for activism to end police violence and systemic racism in the US

I look forward to seeing their growth, successes, and challenges over the coming months and years. 

Podcast: What Every Social Entrepreneur Should Know About Fiscal Sponsorship

Check out my recent podcast on fiscal sponsorship, a unique tool that can increase access to funding, validity, and resources for social enterprises.  This episode is part of Innov8Social and The Impact Podcast series which feature interviews, live events, and reflections on social impact, hosted by Neetal Parekh. 

More about Innov8Social at:

Must-Read New Book on Social Enterprise

I have been thoroughly enjoying reading Neetal Parekh’s recently published book, 51 Questions on Social Entrepreneurship, on how to create social impact through business.

The book has already received numerous stellar reviews, but if you need even more reasons to pick up a copy:

  • The book is fun to read!  Its question and answer format, woven throughout a cohesive story of three social entrepreneurs, grabs the reader’s attention and effectively teaches legal and business concepts.

  • If you are ever having a slow day, or have hit an inspiration slump, then this book will pick you up and recharge you.  The author’s enthusiasm for all topics at the intersection of social innovation and law is irresistible.

  • The book gracefully challenges notions that the law is hesitant to adapt and timid in the face of change, highlighting examples of new legislation, regulations, and policies that represent the building blocks of the legal infrastructure for social impact.

  • The case studies on social enterprise throughout the world illustrate the range of efforts emerging globally.  The array is stunning!

Check out the book on the Innov8Social website, along with other tools, resources, and services available from Innov8Social.