Revenue that an organization generates through fees, interest and/or sales of products or services.
Term used since the 1960s to apply to investments by institutional investors, typically pension funds, to assist in the economic stimulation and improvement of specific geographies. Economically targeted investments are different from standard investments in that they provide capital to under-financed regions of the economy, thus filling "capital gaps." The Department of Labor clarified the proper use of ETIs under ERISA pension fund regulations in 2015 (Interpretive Bulletin 2015-1).
To support or oppose a candidate for public office, including through certain types of partisan educational activity and issue advocacy. Program-related investment (PRI) funds may not be used for electioneering.
A fund held by an institution exclusively for charitable purposes or part thereof that, under the terms of a gift instrument, is not wholly expendable by the institution on a current basis. Generally, the donor has placed a restriction of some kind on the amount that may be spent from the fund. Board-designated funds are institutional funds but not endowment funds. Endowments are governed by the Uniform Prudent Management of Institutional Funds Act (UPMIFA).
Environmental, Social and Governance (ESG) factors are those which social investors may consider as part of their investment analysis as a way to evaluate whether their investments promote sustainable, fair and effective practices and mitigate potential risks. ESG may be referred to as "ESG investments" or "Responsible investing."
Cash invested by owners, developers, or other investors in a project. Equity investments typically take the form of an owner's share in the business, and return on equity involves a share in the profits. Evidence of business equity is usually in the form of shares of stock.
An unsecured investment in a CDFI that is fully-subordinated to all other investments, which means it would be the last investment to be repaid in the event of liquidation. An investment must meet a total of six tests to qualify as EQ2 for Community Reinvestment Act (CRA) and accounting purposes, including a rolling term and an interest rate that is not tied to income, usually well below market. EQ2 acts like permanent capital by enabling a CDFI to innovate and/or increase lending, leverage new debt, and reduce risk to other investors. However, an EQ2 does require interest payments and eventually must be repaid, unlike permanent capital. As a result, it cannot be viewed as a permanent source of financial strength or self-sufficiency.
An equity investment typically takes the form of an owner's share in a for-profit business, and return on equity involves a share in the profits. An equity investment typically takes the form of ownership of a business entity, such as shares of stock, membership interest in an LLC, or a partnership interest in a limited partnership.
Internal Revenue Code section 4940 imposes an excise tax of 1-2 percent on the net investment income of some private foundations. PRIs are excluded from being treated as business holdings for the purpose of calculating excess business holdings subject to excise tax.
The requirements that a private foundation must establish procedures to: (1) see that a grant to an organization that is not a Section 501(c)(3) public charity or the foreign equivalent thereof is used only for the purpose for which it is made, (2) obtain full and complete reports from the grantee organizations on how the funds are spent, and (3) to make full and detailed reports on the expenditure to the IRS. Grants or PRIs for which expenditure responsibility must be exercised are disclosed on a private foundation's Form 990PF.
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