by Elizabeth Carrott Minnigh
Riding the train home to Washington, D.C., after a meeting in New York City earlier this week, I found myself immersed in a New Yorker article by Malcolm Gladwell, "The Tweaker: The Real Genius of Steve Jobs." The article contended that the real genius of Jobs was not in creating something new, but rather in tweaking existing products to make them better and more accessible. As I read the article, I began to draw a similar conclusion about the low-profit limited liability company (L3C).
The L3C did not create something new. The program-related investment (PRI) rules have been in place since 1969 and the ability to make a PRI in a limited liability company (LLC) has existed since the first LLC law was passed in Wyoming in 1977. When Robert Lang of Americans for Community Development and Marcus Owens of Caplin & Drysdale sat down to craft the proposal that would become the first L3C statute, they didn't start with a blank slate. Instead, they tweaked the LLC law to make it better and more accessible for private foundations looking to make a PRI. And I have continued the tweaking process while working on proposals that would become legislation in other states.
The bipartisan Philanthropic Facilitation Act of 2011 introduced by Reps. Aaron Schock (R-Ill.) and Jared Polis (D-Colo.) is the next step in tweaking the laws to make PRIs a little better, a little more accessible for private foundations. The Act would not change the fundamentals of PRIs. Rather, it would increase their efficiency because the entity, including but not limited to L3Cs, would be able to voluntarily register with the IRS as a potential PRI recipient. Once that registration was approved, multiple foundation investors could use the approval to streamline their internal processes. Additionally, the Act would improve transparency by requiring registered entities to report separately and publicly on the PRIs they receive.
For those who think these little tweak to the laws regarding PRIs cannot be transformative, look around and see how many lives have been transformed by the tweaks of Steve Jobs.
Elizabeth Carrott Minnigh is counsel with D.C. office of the law firm of Buchanan Ingersoll & Rooney PC.