The state L³C legislation does not create a new opportunity for foundations to make PRIs instead of grants. Foundations already utilize PRIs in LLCs, partnerships and corporations to accomplish charitable goals. However, these entities may not—and, under state law, generally are not required to—articulate a commitment to charitable purposes in their governing documents. By enacting legislation that recognizes the L³C, states are creating a business form with an identifiable designation—i.e., “L³C.” This designation signals to state and federal regulators that the entity is organized and operated to accomplish charitable or educational purposes, and regulators may implement programs or mechanisms to monitor whether these requirements are being met. Indeed, it is virtually impossible for regulators to identify taxable entities operating under a charitable purpose unless the organizations have been formed as L³C's. Thus, the state L³C legislation provides a new way for the public, the IRS, and state charity regulators to identify more easily organizations that seek charitable funding and purport to do charitable work.

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