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The History of the L3C
Americans for Community Development is a coalition of organizations dedicated to bringing for profit metrics and financing to as many social enterprises as possible as a means to achieve socially beneficial goals. By coordinating a mix of private foundation support, commercial investment, and other sources of investment, use of an L3C furthers the accomplishment of a charitable purpose while minimizing the overall risk for investors, encouraging economic development investment and acting as a catalyst for social change.
The L3C* was created by Robert Lang, CEO of the Mary Elizabeth & Gordon B. Mannweiler Foundation (with many years of corporate and nonprofit management experience) and carefully refined with the assistance of Marcus Owens, a partner in Caplin & Drysdale, the preeminent Washington DC tax law firm (former director of the exempt division of the IRS for 10 years); Arthur Wood, the Director of Social Financial Services for Ashoka (over 20 years of financial experience at upper level management positions with leading UK financial institutions) and many other individuals and organizations whose assistance we value greatly.
It will be a brand new tool in the foundation toolbox designed to expand the use of PRIs (Program Related Investments) and to create a vehicle which brings together government, for profit, nonprofit, individuals and corporations under one umbrella. It will attract investment capital not just charitable dollars and operate as a for profit with the benefits of for profit assessment metrics.
As an additional benefit we believe the L3C will achieve brand name status and become a symbol of a for profit organization organized to achieve socially beneficial results.
Upon recognizing the merits of the L3C concept and the vast potential it holds for achieving societal good, Americans for Community Development was formed to encourage the expansion of current laws governing the LLC to include the L3C.
Surprisingly, though the Internal Revenue Code allows all private foundations to make program related investments, PRIs are woefully underutilized because of the bureaucratic hurdles and significant costs associated with obtaining "sign-off" from the IRS in the form of a private letter ruling (PLR). Without a PLR to inspire investor confidence, a remarkable tool for achieving social change is eschewed in favor of distribution of payout solely through grants.
While grants certainly are meaningful and useful in achieving numerous charitable purposes, there is no doubt that the use of program related investments has potential to offer more flexible, leveraged, and creative solutions to our society's increasingly complex problems. The combination of private foundation support and commercial investment promises to expand opportunities for achieving socially beneficial goals, such as economic development, environmental remediation and more.
Working with entities such as the Council on Foundations, the Mary Elizabeth and Gordon B. Mannweiler Foundation, Social Enterprise Alliance and others, we hope to attract a diverse group of foundations and other entities interested in investing in innovative and exciting initiatives to develop strong and reinvigorated communities while furthering the social good. With the L3C, we believe the possibilities are limitless.
* low-profit limited liability company |
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