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New ‘L3C’ Aims To Help Nonprofits With Tech
Aug 5, 2009; CBS News Blog | The concept of Low Profit Limited Liability Corporations (L3Cs) is making bipartisan headway in a couple of states, state laws allowing L3Cs enacted in Michigan, Vermont, Utah, North Dakota, Wyoming, and the Crow Indian Nation, and proposals being considered in other states, including North Carolina. Foundations interested in being able to give non-grant investments such as loans and loan guarantees (program related investments, typically) to entities other than 501(c)(3) nonprofits have been among the most enthusiastic promoters of the L3C concept, led by the advocacy of the foundations’ national trade association, the Council on Foundations.  In North Carolina, a Republican state senator has pitched the L3C model as a means of attracting foundation investment into the state’s declining furniture and textile industries. Michigan has just certified its third official L3C, which will be a consulting firm providing technology assistance to nonprofits. Of course, we know of several regular old 501(c)(3) groups that provide top-notch IT services to nonprofit clients. The nonprofit sector should be watching the growth of L3Cs to figure out which new L3Cs are being established to attract philanthropic capital where it might really be needed versus simply serving as mechanisms for for-profit entrepreneurs to tap philanthropic endowments.  Nonprofits should also be watching to see when foundation support to L3Cs comes at the expense of PRIs that could have and should have gone to nonprofits. If L3Cs serve as vehicles for attracting capital to critically important but undercapitalized economic or public functions which need the access to philanthropy, maybe they’ll be worthwhile. But if they turn out to be simply shells (or shills) for for-profit business people to tap tax exempt capital, the nice talk about L3Cs being for-profits with the souls of nonprofits will turn out to be rather hollow. See also Five Questions for Rick Zwetsch, principal partner, interSector Partners L3C, Building the Ecosystem Marketplace, Effort mounted to revive old mills and Opinion: Let’s Stop Bribery in North Carolina. —Rick Cohen

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