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1. What is the L3C?
2. Are any L3C s already in operation?
3. How can I form an L3C?
4. What if my state has not yet adopted the L3C legislation?
5. How does an L3C differ from a nonprofit charitable organization and how does it differ from a standard for-profit business?

1. Can you provide examples of the sort of enterprise that might be organized as an L3C?

FINANCING AN L3C

1. How will L3Cs attract the capital they need?
2. Should foundations be undertaking capital-intensive, high risk joint ventures with for-profit partners?

1. How would an L3C be taxed?
2. Are investments in an L3C tax deductible?
3. Does it matter for federal income tax purposes whether an L3C is considered a charitable or non-charitable entity under state law?
4. Would the IRS require L3Cs that are not single-owner entities to file separate returns as partnerships or corporations?
5. Are there any proposed reporting and disclosure requirements that would facilitate the verification of, compliance with L3C requirements and state oversight over charitable organizations and assets? Is there any other current method for the IRS, the states and the public to receive L3C-specific information from a charitable investor?
6. Are special conflict of interest prohibitions necessary, such as a prohibition on participation in a for-profit investment in an L3C by persons related to the managers of the private foundation making the PRI?
7. Is the IRS studying the issue to determine the tax consequences of L3Cs?
8. If a significant portion of an L3Cs capital is provided by investors seeking market rates of return, how can it be said that the production of income is not a significant purpose of the L3C?
9. Does the state legislation allowing for the formation of L3Cs create an opportunity for foundations to circumvent the IRS rules?

1. What safeguards and enforcement mechanisms are in place to ensure that L3Cs are not only organized for charitable purposes, but they also operate in a manner consistent with those purposes?
2. How can one determine that the for-profit investors in the L3C venture are not receiving improper private benefit and that charitable purposes are being advanced through the L3C?
3. Are there any mandatory provisions that would need to be included in L3C operating agreements to ensure that for-profit interests are subordinate to the company’s charitable purposes?
4. Under what circumstances are economic development projects or job creation programs considered charitable under § 501(c)(3) of the Code?
5. If a private foundation investor is required under the terms of an L3C operating agreement to cover any loss or a portion of a loss to for-profit investors seeking a “market return” on their investment, does this arrangement make the production of income a significant purpose? If a private foundation investor is required under the terms of an L3C operating agreement to make an additional capital investment, does this arrangement make the production of income a significant purpose?
6. What are the factors that determine whether the production of income is a significant purpose?
7. Given that L3Cs are intended to be predominantly charitable, how can state regulators be assured that they will have appropriate oversight over L3Cs?
8. Does the L3Cs designation increase the burden on state and federal regulators?
9. If there is no federal legislation or change in IRS policy concerning PRI and L3Cs, does state L3C legislation serve any purpose?
10. Would it be appropriate for a private foundation to invest in an L3C in which an officer or director had an ownership or other financial interest?

1. Will the L3C concept reduce transactional costs associated with PRI?
2. Will the promotion of L3Cs cause foundations to shift funds from existing grants and beneficiaries?
3. While there is a minimum distribution requirement of 5%, is there any maximum distribution limitation? Is there any prohibition against investing all the foundation’s assets in PRI?
4. What are the consequences for the foundation investors if it turns out the L3C was not properly structured to meet the IRS requirements for acceptable forms of PRI?
5. Does the L3C designation relieve a foundation from its obligation to exercise due diligence?
6. Are L3Cs "state-created mechanisms" that encourage private foundations to make PRIs – as an alternative to grants?

1. Is this federal legislation really necessary?
2. If there is no federal legislation or change in IRS policy concerning PRI and L3Cs, does state L3C legislation serve any purpose?