International Grantmaking Regulations

FAQ: Global Grantmaking

council-webteam — Sun, 16 Nov 2014 14:40:42 +0000

FAQ: Global Grantmaking council-webteam Sun, 11/16/2014 - 09:40

FAQ: Global Grantmaking

What are the legal requirements for private foundations wishing to make cross-border grants?
What are the legal requirements for public charities wishing to make cross-border grants?
What anti-terrorism actions and policies of the U.S. Government relate to global grantmaking?

What are the legal requirements for private foundations wishing to make cross-border grants?

Private foundations wishing to make a cross-border grant must ensure that:

The grant is clearly for a charitable purpose, and
The grant counts as a qualifying distribution for the purpose of meeting the foundation’s annual distribution requirement.

The easiest way for a private foundation to satisfy both of these requirements is to choose a grantee that is recognized by the IRS as a public charity.

If a private foundation chooses to make a grant to a non-U.S. organization that is not recognized by the IRS as a public charity, the foundation must follow one of the two options provided in the tax code:

Determine that the non-U.S. grantee is the “equivalent” of a U.S. public charity (“equivalency determination”), or;
Exercise “expenditure responsibility.”

What is Equivalency Determination?

Equivalency determination is a process designed to assess whether a potential non-U.S. grantee organization is the equivalent of a U.S. public charity. It involves collecting certain information from the grantee about its origins, activities, and finances through an affidavit (see link below for sample affidavit). On the basis of the information provided in the affidavit, the private foundation then makes a good-faith determination concerning U.S. public charity equivalency and documents that decision. The determination may be made by the private foundation on its own or relying on the written opinion of counsel or the potential grantee’s counsel. The process need not be complicated; many private foundations routinely conduct equivalency reviews of prospective grantees.

The following documents, translated into English, are necessary to make an equivalency determination:

Founding documents of the organization.
A description of the purposes of the organization as well as its past and present activities.
Dissolution provisions, either contained in the founding documents or applicable law (see link below to country notes).
Restrictions on private benefit, non-charitable activities, lobbying, and participation in political campaigns, either contained in the founding documents or applicable law (see link below to country notes)
Detailed financial records (excluding religious institutions or medical or educational organizations).

Advantages of Equivalency Determination

This method does not require grantee reports at the end of each accounting period, a separate account dedicated to charitable purposes, or detailed reporting on Form 990-PF.

Disadvantages Equivalency Determination

This method requires substantial documentation in English plus financial reporting from previous years.

What is Expenditure Responsibility?

Expenditure responsibility is a method of making direct cross-border grants to a non-U.S. organization whereby the private foundation assumes full responsibility for ensuring that its grant is used for a charitable purpose. The process need not be unduly burdensome for either the grantmaker or grantee. Private foundations may apply expenditure responsibility grants to their payout requirement if they take the following steps:

Undertake a pre-grant inquiry with reasonable determination that the intended grantee is capable of fulfilling the charitable purposes of the grant.
Conclude a grant agreement that includes spending and reporting responsibilities and commits the grantee to spend the money only for the specified charitable purposes.
Require grantee to maintain grant funds in a separate account for charitable purposes.
Require one or more reports from the grantee detailing how the funds have been spent.
Report the grant on the foundation’s form 990-PF.

Reporting for expenditure responsibility grants:

The U.S. Department of the Treasury requires that recipients of expenditure responsibility grants provide reports on how the funds were used. Existing IRS guidance does not provide clear answers on the following aspects of the reporting requirement: grants for capital equipment, grants for endowment, and reasonable efforts to secure reports from grantees. In the absence of guidance from the IRS, the Council on Foundations has made available its recommendations to international grantmakers in a letter to the U.S. Department of the Treasury: Guidance on Expenditure Responsibility: Council on Foundations Letter to Treasury (in PDF).

Advantages of Expenditure Responsibility

Because equivalency determination can occasionally be a lengthy and ultimately unsuccessful process (i.e., the prospective grantee turns out not to be the equivalent of a U.S. public charity), grantmakers often choose to exercise expenditure responsibility instead.

Disadvantages of Expenditure Responsibility

Grant reports are required from the grantee until all funds have been expended, which may require monitoring the grant over a period of several years.

How do I decide whether to use Equivalency Determination or Expenditure Responsibility?

In 2001, the IRS made clear in a letter to the Council on Foundations that a private foundation wishing to make a grant to a foreign organization could choose between expenditure responsibility and equivalency determination, and that there was no obligation to rule out equivalency before turning to expenditure responsibility.

Table 1: When There Is No Choice

Situation	Required Action
Grantee is a non-charitable enterprise that will use the grant for charitable purposes	Expenditure responsibility is the only way to make this grant
Grantee cannot supply the information required for an equivalency affidavit	Grantor must use expenditure responsibility because it does not have enough information for an equivalency determination
Grantor evaluates the affidavit and concludes that despite everyone’s best efforts, the grantee is not the equivalent of a public charity	Expenditure responsibility is the only way to make the grant

Table 2: When the Grantor Can Choose

Circumstances that favor Equivalency	Circumstances that favor Expenditure Responsibility
Grantor expects long-term relationship	Grantor plans a one-time grant
Grantee can supply governing documents and no financial data is needed (i.e., grantee is a school, hospital, or church)	Grantee may have considerable difficulty in supplying historical financial data or obtaining a certified copy of its governing documents
Grantor wants flexible reporting procedures	Grantor wants strict reporting provisions
Grantor wants to make a general support grant
Grantee plans to re-grant funds received to accomplish its exempt purposes

What are the legal requirements for public charities wishing to make cross-border grants?

International grantmaking requirements for public charities are significantly less onerous than those for private foundations, yet public charities still have a fiduciary duty to ensure that grant funds are used exclusively for charitable purposes. Although they are not required to do so, most public charities follow the grantmaking rules for private foundations.

The Pension Protection Act of 2006, signed into law by President Bush on August 17, 2006, introduced new rules for international grants made from donor-advised funds. International grantmaking from donor-advised assets now requires equivalency determination or expenditure responsibility. While the Council is seeking guidance as to what expenditure responsibility means for public charities, the regulations for private foundations provide some guidance.

The suggested approach by the Council on Foundations for public charities that do not use donor-advised funds for their international grantmaking is as follows:

Obtain English copies of organizational documents and a description of the activities and programs of the grantee.
Enter into a specific written agreement, documenting the grantee’s commitments and the use of funds for charitable purposes.
Obtain a yearly accounting of the funds for each year until the funds are expended.

What anti-terrorism actions and policies of the U.S. Government relate to international grantmaking?

The U.S. government took a number of steps to ensure that charitable funds were not diverted to terrorists and their organizations in the United States and around the world following the terrorist attacks of September 11, 2001. These included Executive Order 13224 and the USA Patriot Act, both issued shortly after 9/11, as well as the Treasury Department’s “Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities,” originally issued in November 2002 and most recently re-issued on September 29, 2006. This section provides a brief description of U.S. government anti-terrorism initiatives:

Executive Order 13224
U.S.A. Patriot Act
U.S. Department of the Treasury Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities

What does Executive Order 13224 do?

Executive Order 13224 was signed by President George W. Bush on September 24, 2001, to cut off resources to terrorists and terrorist organizations through asset blocking. The Executive Order prohibits transactions with those entities deemed by the Executive Branch to be associated with terrorism and freezes all assets controlled by or in the possession of these entities and those who support them. The EO prohibits the provision of any financial or material support to any entity specifically listed in an Annex or determined by the Secretaries of State or Treasury, as well as any associated entities. Several U.S. government agencies have created lists of known or suspected terrorists, as has the United Nations and the European Union. The most comprehensive of the U.S. lists is the Treasury Department's Specially Designated Nationals (SDN) list. Both the Treasury Department and Executive Order lists are physically included in the Executive Order. The open-endedness of the prohibitions contained in the EO is worrisome for grantmakers. No distinction is made in the EO between domestic and international terrorism.

How does the U.S.A. Patriot Act relate to grantmaking?

The U.S.A. Patriot Act was enacted in October 2001 and reauthorized in 2005. Among its many provisions, the Act increased existing criminal penalties for knowingly or intentionally providing material support or resources for terrorism. For grantmakers, these criminal statutes open the possibility that they could be found -- despite their best intentions -- to have knowingly or intentionally provided material support or resources for terrorism. Another concern for grantmakers is potential civil liability should their grants end up in the wrong hands. Nonprofit grantmaking organizations are not immune to potential legal liability because of the inherent charitable or humanitarian nature of their missions.[1]

What are the Treasury Department’s Voluntary Anti-Terrorist Financing Guidelines?

On September 29, 2006, the U.S. Department of the Treasury issued an updated version of the “Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities.” The “Guidelines” were originally issued in November 2002 and revised in December 2005 to assist charitable organizations in complying with Executive Order 13224 and the USA Patriot Act following 9/11. The new Guidelines may be accessed here: Revised Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities

On the same day, the Treasury Department released a document responding to public comments it received during the comment period following the release of the second version of the Guidelines in December 2005. This document may be accessed: Response to Comments Submitted on the U.S. Department of the Treasury Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities (PDF).

These comments include a submission by the Treasury Guidelines Working Group, a broadly representative group of more than 40 U.S. charities, foundations, religious organizations, corporations, umbrella associations, watchdog groups, and advisors, created in the spring of 2004 and coordinated by the Council on Foundations. In February 2006, the Treasury Guidelines Working Group submitted comments in response to the invitation for public comments on the revised “Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities” issued on December 5, 2005. Download the comments (PDF).

The working group developed the Principles of International Charity (PDF) that identifies eight principles to guide the anti-terrorism efforts of charities. The Principles of International Charity were submitted to the Treasury Department as an alternative to the Guidelines in March 2005.

Read the revised Anti-Terrorist Financing Guidelines: Voluntary Best Practices For U.S.-Based Charities
Download the Treasury Guidelines Working Group Comments (PDF) submitted to the Treasury Department in February 2006
Download the Principles of International Charity (PDF)
Download Council on Foundation Comments on Original U.S. Department of Treasury Anti-Terrorist Financing Guidelines (PDF) submitted in June 2003.

How should grantmakers respond to these various anti-terrorism measures?

Despite the attention paid in the media to a handful of charities alleged to have helped finance and aid terrorist activities, the Executive Order and the U.S.A. Patriot Act are not targeted directly at grantmaking organizations. As a result, they do not spell out specific procedures that grantmakers should undertake in order to comply with the law.

In the absence of such guidance, grantmakers will have to rely a good deal on common sense. Some useful ideas to consider include:

Know as much as you can about your grantees and their associates.
Know what you can about donors who play a role in identifying grantees.
Involve your donors and grantees in the compliance process.
Educate board and staff about internal anti-terrorism measures.
Consider developing an anti-terrorism policy statement.
Discuss concerns with legal counsel.
Document steps taken to comply with the Executive Order and the Patriot Act.
Keep informed about anti-terrorism developments.
Consult International Grantmaking: A Guide for Funders Making Grants Outside the United States.

International grantmakers are responding to the federal anti-terrorism policies in many ways. The Council’s global philanthropy experts conducted an informal survey of a representative sample of approximately 35 of the Council’s international grantmaking members to determine what, if any, changes they had made or were planning to make in their procedures because of the government’s anti-terrorism actions. Read the results of this survey in: "Federal Anti–Terrorism Measures: How Foundations and Corporate Grantmakers are Responding."

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Basic Options for Global Grantmaking by U.S. Foundations

council-webteam — Wed, 13 Nov 2013 22:51:54 +0000

Basic Options for Global Grantmaking by U.S. Foundations council-webteam Wed, 11/13/2013 - 17:51

Basic Options for Global Grantmaking by U.S. Foundations

The Council on Foundations' definition of “international grantmaking” includes grants made by U.S. foundations and corporations to overseas recipients as well as grants made to U.S.-based organizations operating international programs. This also includes grants made toward activities wholly within the Unites States that have significant international purpose and impact.

U.S. foundations and corporations interested in international grantmaking have several options:

U.S. 501(c)(3) Organizations

The simplest option is to make a grant directly to another U.S. 501(c)(3) charitable organization to support its international programs or activities.

What is a U.S. 501(c)(3) organization?

“Friends of” Organizations

Another easy option is to make a grant to a U.S.-based 501(c)(3) “friends of” organization that has been set up to raise funds for a specific charitable program or activity outside the U.S., often a university, museum, or hospital.

How a Private Foundation Can Use "Friends Of" Organizations

Donor-Advised Funds

Still another relatively straightforward option is to establish a donor-advised fund with a U.S.-based 501(c)(3) public charity that can, for a fee, provide a range of legal and monitoring services to donors wishing to support organizations located outside the United States. One increasingly popular option for making international grants is to set up a donor-advised fund with a willing U.S. community foundation, some of which are linking local ethnic communities that they serve with the communities' countries of origin.

A donor-advised fund is not a separate public charity. It is instead owned, controlled, and administered by a public charity, subject to an agreement under which the donor (or an adviser designated by the donor) has the right to make recommendations with respect to the distributions and/or investments. Community foundations and some intermediary organizations offer donor-advised funds as a giving option for their donors.

Direct Cross-Border Grants

Making cross-border grants directly to organizations located in other countries is an option that requires some additional steps due to special IRS rules for private foundations, but the process need not be difficult. Many private foundations choose this option because it enables them to have a one-to-one relationship with their overseas grantee partners.

Legal resources on the Council’s website explain the two approaches embodied in the IRS rules —equivalency determination and expenditure responsibility—that private foundations may choose if they wish to make direct grants to non-U.S. grantees. Public charities often follow these rules as well, although they are not required to do so.

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Equivalency Determination or Expenditure Responsibility

council-webteam — Sun, 10 Nov 2013 01:57:12 +0000

Equivalency Determination or Expenditure Responsibility council-webteam Sat, 11/09/2013 - 20:57

Equivalency Determination or Expenditure Responsibility

Private foundations wishing to make a cross-border grant must ensure that:

The grant is clearly for a charitable purpose, and
The grant counts as a qualifying distribution for the purpose of meeting the foundation’s annual distribution requirement.

The easiest way for a private foundation to satisfy both of these requirements is to choose a grantee that is recognized by the IRS as a public charity.

Determine that the non-U.S. grantee is the “equivalent” of a U.S. public charity (“equivalency determination”).
Exercise expenditure responsibility.

Equivalency Determination

Equivalency determination documents that the grantee organization is the equivalent of a U.S. public charity. To fulfill the requirements of equivalency determination, the private foundation must make a good faith determination on the basis of an affidavit from the potential grantee or an opinion of legal counsel (either the private foundation’s or the potential grantee’s) that the grantee is the equivalent to a U.S. public charity. The following documents should be obtained and translated into English:

founding documents of the organization
detailed description of the purposes of the organization and its past and proposed activities
dissolution provisions, either contained in the applicable law or in the founding documents
legal or founding document restrictions on private benefit, noncharitable activities, lobbying, and participation in political campaigns
detailed financial records (excluding religious institutions or medical educational organizations)

Advantages: This method does not require grantee reports at the end of each accounting period, a separate account dedicated to charitable purposes, or detailed reporting on Form 990-PF.

Disadvantages: This method requires gathering numerous documents translated into English, preparing affidavits, and compiling detailed financial reporting from previous years (required to show that the foreign organization is not the equivalent of a U.S. private foundation) to make a “good faith determination” that the non-U.S. grantee is the equivalent of a U.S. public charity.

Expenditure Responsibility

Private foundations may apply grants to their payout requirement if they take the following steps to ensure the grant funds are used for charitable purposes:

Undertake a pre-grant inquiry with reasonable determination that the intended grantee is capable of fulfilling the charitable purposes of the grant.
Conclude a grant agreement that includes spending and reporting responsibilities and commits the grantee to spend the money only for the specified charitable purposes.
Require the grantee to maintain grant funds in a separate account for charitable purposes.
Require one or more reports from the grantee detailing how the funds have been spent.
Report the grant on the foundation’s form 990-PF.

Advantages: Because equivalency determination can be a lengthy and sometimes difficult process, requiring the collection of a substantial amount of information up front, grantmakers often choose to exercise expenditure responsibility.

Disadvantages: Grants reports are required from the grantee until all the funds have been expended, which may require monitoring the grant over a period of several years.

Deciding Whether to Use Equivalency Determination or Expenditure Responsibility

According to a letter from the IRS to the Council on Foundations, a private foundation wishing to make a grant to a foreign organization can choose between expenditure responsibility and equivalency determination, and there is no obligation to rule out equivalency before turning to expenditure responsibility.

When the Grantor Doesn’t Have a Choice

Situation	Required Action
Grantee is a noncharitable enterprise that will use the grant for charitable purposes	Expenditure responsibility is the only way to make this grant
Grantee cannot supply the information required for an equivalency affidavit	Grantor must use expenditure responsibility because it does not have enough information for an equivalency determination
Grantor evaluates the affidavit and concludes that despite everyone’s best efforts, the grantee is not the equivalent of a public charity	Expenditure responsibility is the only way to make the grant

When the Grantor Can Choose

Circumstances that favor Equivalency	Circumstances that favor Expenditure Responsibility
Grantor expects a long-term relationship	Grantor plans a one-time grant
Grantee can supply governing documents and no financial data is needed (that is, the grantee is a school, hospital, or church)	Grantee may have considerable difficulty in supplying historical financial data or obtaining a certified copy of its governing documents
Grantor wants flexible reporting procedures	Grantor wants strict reporting provisions
Grantor wants to make a general support grant
Grantee plans to re-grant funds received to accomplish its exempt purposes

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How Foundations Can Partner with USAID

JasonLudwig — Thu, 14 Mar 2024 20:34:11 +0000

How Foundations Can Partner with USAID JasonLudwig Thu, 03/14/2024 - 16:34

How Foundations Can Partner with USAID

Foundations have been partnering with USAID in a variety of ways to advance locally led development, and below are how some of those partnerships are being executed. For member foundations interested in working with USAID on their own locally led development initiatives, Council on Foundations staff is available to help connect those foundations with USAID staff to begin exploring ways they can work together.

In 2023, 15 global foundations joined with bilateral donors to endorse a Donor Statement on Locally Led Development. Since then, we've seen steadily growing momentum for establishing both informal and formal partnerships between philanthropy and government aid agencies.

Establishing a Formal Partnership with USAID

Foundations are increasingly establishing formal partnerships with USAID, utilizing Memorandums of Understanding (MOU) to collaborate on a range of activities. Some examples of these partnerships between foundations and USAID include:

Conrad N. Hilton Foundation: Through this agreement, USAID and the Hilton Foundation will identify and apply their respective organizational strengths to advance locally led efforts in areas of shared interest, such as early childhood development, youth empowerment, disaster response and humanitarian assistance, safe water systems, and engagement with faith-based and community organizations. The two organizations will leverage their convening power, share networks, and coordinate outreach to mobilize U.S.-based and global philanthropies, civil society, and other stakeholders to prioritize elevating local leadership of development and humanitarian assistance.
Hewlett Foundation: USAID signed a Memorandum of Understanding with the William and Flora Hewlett Foundation and the Center for Global Development (CGD) focusing on approaches to evaluation and evidence-generation. The partnership launches USAID’s Evidence Localization Initiative, to begin in Africa, and contributes to USAID, CGD, and Hewlett's broader priorities on advancing evidence-informed policy and locally led development.
Humanity United: Humanity United signed an MOU with the USAID’s Center for Conflict and Violence Prevention establishing a three-year collaboration to work towards advancing best practices related to locally led development and inclusive peacebuilding; facilitating information gathering and sharing through structured feedback sessions with local peacebuilders and USAID Missions; and creating a network of domestic and civil society organizations to provide input and guidance as locally led development practices evolve.
Skoll Foundation: USAID and the Skoll Foundation signed an MOU to explore and evaluate innovative, efficient, and, where appropriate, joint approaches for locally led development, particularly around (a) engaging local intermediaries who serve as fiscal agents or provide administrative support (e.g., payroll, award management, human resources, etc.) to a local network of organizations; and (b) identifying, coaching, and elevating local actors to be better positioned to receive awards from USAID and other donors. Additionally, USAID and Skoll will strengthen collaboration at the local level in USAID partner countries and build multi-stakeholder partnerships, including with additional foundations and likeminded donors, to support health, climate, and gender equality and equity, and optimize investments to address information manipulation, strengthening the resilience of information and media environments. USAID works in tandem with the Skoll Foundation in countries such as Brazil, where they aim to expand the abilities of local actors to execute projects that push forward climate action, biodiversity conservation, and thriving communities in the Brazilian Amazon.

USAID and Locally Led Development

USAID has doubled down on locally led development during the Biden Administration. In November 2021, agency Administrator Samantha Power announced two targets in pursuit of these goals: (a) by Fiscal Year (FY) 2025, USAID will direct a quarter of its funding directly to local partners; and (b) by 2030, at least half of USAID programs will create space for local actors to exercise leadership over priority-setting, activity design, implementation, and defining and measuring results. USAID's FY22 progress report notes that it reached $1.6 billion in direct local funding – a step in the right direction, but far from its targets.

USAID has also released a Local Capacity Strengthening Policy and an updated Risk Appetite Statement, clearly communicating how it intends to support its local partners.

Learn more about how USAID is supporting research and initiatives around locally led development.

Democracy Delivers Partnerships

The Democracy Delivers initiative was launched in 2022 by Administrator Power and U.S. Secretary of State Antony Blinken to bring together partners across sectors that can surge resources to countries undergoing moments of democratic renewal to maximize the likelihood that their democratic gains endure. Foundations who have made commitments to support Democracy Delivers include:

The Ford Foundation, which committed $20 million in new grants to support civic engagement in Moldova and Zambia and to advance the work of democracy-oriented actors in Tanzania and Nepal.
The Rockefeller Foundation, which committed up to approximately $28 million to benefit the Democracy Delivers cohort through rural electrification, climate resilience, food security, and more.

Additionally, in 2023, the following foundations announced investments supporting Democracy Delivers countries and objectives: The Chandler Foundation, The Conrad N. Hilton Foundation, Google.org, Humanity United, The International Chamber of Commerce, The Mott Foundation, The David and Lucile Packard Foundation, The Skoll Foundation, The Tent Partnership for Refugees, The Tinker Foundation, The UPS Foundation, The Vodafone Foundation, and WINGS.

Read more about how foundations have supported global efforts to advance locally led development and democracy in Inside Philanthropy.

Additional Resources About Partnering with USAID

Interested in Partnering with USAID?

The Council can help. Contact govt@cof.org.

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International Grantmaking: A Guide for Funders Making Grants Outside the United States

ben.mcdearmon@cof.org — Mon, 04 Feb 2019 22:05:26 +0000

International Grantmaking: A Guide for Funders Making Grants Outside the United States ben.mcdearmon@… Mon, 02/04/2019 - 17:05

International Grantmaking: A Guide for Funders Making Grants Outside the United States

A Chapter in Mastering Foundation Law:
The Council on Foundations Compendium of Legal Resources

Making grants to institutions outside of the United States is challenging and rewarding. We hope this revised publication will be a useful resource that encourages grantmakers of all types to expand their grantmaking beyond our borders.

The target audience for this chapter includes private foundations, community foundations, and direct corporate-giving programs. Although this chapter occasionally references the individual donor and the laws that affect that donor, we do not make an effort to provide a comprehensive analysis of the rules for individual giving.

The overriding objective of this chapter is to dissect and explain the various legal and technical requirements necessary to comply with the U.S. law and regulations concerning grants to non-U.S. organizations. Although these rules tend to inhibit foundations and business corporations from involvement in non-U.S. grantmaking, more and more funders each year are moving into the international arena with success. We hope that this chapter will increase your comfort level for grantmaking to non-U.S. institutions.

This chapter is divided into seven parts:

Part One: The Legal Framework for U.S. Charities and International Activity

The Internal Revenue Code (IRC or Code), the Treasury Regulations (Regulations), and subsequent guidance provides the framework for engagement in international grantmaking by defining charitable activity, outlining rules to obtain a charitable deduction or make grants to non-U.S. organizations, and classifying grantmakers and potential grantees. We begin with a review of the basics here.

Part Two: IRS-Recognized Charities with Non-U.S. Activities

Given the added administrative details necessary for making grants to organizations not recognized by the IRS, it is understandably tempting to look for an easier method. The most straightforward way to fund charitable activities outside the United States is to make grants to IRS-recognized charities organized in the United States that have active programs outside this country. Our discussion of non-U.S. grantmaking starts with this approach.

Part Three: Corporate Philanthropy and International Giving

Corporate law allows U.S. for-profit corporations to give anything they want to anyone in any place so long as the gift is consistent with a legitimate purpose of that corporation. Corporate law generally prohibits actions considered ultra vires, or beyond legitimate corporate purposes. However, if the corporation wants to make a charitable gift and obtain a charitable tax deduction, there are significant limitations beyond the question of whether or not the gift serves a corporate purpose.

Part Four: International Grantmaking by Public Charities

Some sectors of American philanthropy—churches, for example—have a long tradition of supporting activities in other countries. More and more public charities, including community foundations, are exploring the possibility of expanding their programs and services across international borders. This section provides guidance to public charities that make grants to non-U.S. organizations.

Part Five: International Grantmaking by Private Foundations

This section is designed primarily for private foundations. The information, however, is also valuable to corporations and public charities. Any private foundation formed by a U.S. corporation (a company foundation) must abide by these rules for any grants to non-U.S. organizations; and while public charities are not bound to these rules, they provide useful guidance and relative safety if they are followed closely.

Part Six: Non-Tax Regulation of International Grantmaking

The majority of this chapter focuses on the tax rules imposed on grants sent outside the United States. This Part Six, however, will examine other areas of the law that may affect international grantmaking.

Part Seven: Additional Resources

Accessing this Chapter

As a benefit of Council membership, members can download this chapter for free. Nonmembers of the Council can purchase this chapter of the Legal Compendium in our store for $199.

Members Download for Free

Nonmembers Purchase from Store

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Updates on Global Giving and Non-Tax US Regulations that Impact Funders

kelsey.gerber@cof.org — Wed, 23 Jan 2019 20:56:09 +0000

Updates on Global Giving and Non-Tax US Regulations that Impact Funders kelsey.gerber@… Wed, 01/23/2019 - 15:56

Updates on Global Giving and Non-Tax US Regulations that Impact Funders

Webinar Recording

If you have any questions, pleae email legal@cof.org.

Topics included regulations like the Foreign Agent Registration Act (FARA), Foreign Corrupt Practices Act (FCPA), US Treasury’s voluntary anti-terrorism guidelines and more.

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Call Recording: New Chinese Laws Regulating Domestic Charities and International NGOs: What do you need to know?

storme.gray@cof.org — Thu, 12 May 2016 14:10:11 +0000

Call Recording: New Chinese Laws Regulating Domestic Charities and International NGOs: What do you need to know? storme.gray@cof.org Thu, 05/12/2016 - 10:10

Call Recording: New Chinese Laws Regulating Domestic Charities and International NGOs: What do you need to know?

Download the Recording

In 2015, the Council and ICNL convened foundations to discuss how a draft Foreign NGO law in China might impact their work. The Council also submitted formal comments about concerns with this law to the Chinese government.

In mid-March 2016, China approved the long-awaited domestic charity law, following more than ten years of work with governments, nonprofits, and donors to strengthen regulation of nonprofits in China. In late April 2016, the Chinese government also approved a new Overseas NGO law.

This conference call was an opportunity for funders working in China to hear updates on both the domestic charity and overseas NGO laws in China and ask questions about how it may impact their work. Professor Sidel of ICNL, who has worked with foundations, NGOs, and other groups in China for more than three decades, describes both laws. Additionally, the U.S.-based Asia Foundation, which has worked in China for decades, shared how the law may impact their grantmaking, programs, and their grantees.

Read more about the new laws in Alliance Magazine and Foreign Policy. Translations of the Foreign NGO law are available from China Development Brief and China Law Translate.

Speakers

Mark Sidel

Doyle-Bascom Professor of Law and Public Affairs, University of Wisconsin-Madison
Consultant (Asia), International Center for Not-for-Profit Law (ICNL)

Suzanne Siskel

Executive Vice President and Chief Operating Officer for The Asia Foundation

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Call Summary: Challenges and Opportunites for Grantmaking in Mexico

natalie.ross@cof.org — Wed, 08 Jul 2015 16:50:23 +0000

Call Summary: Challenges and Opportunites for Grantmaking in Mexico natalie.ross@cof.org Wed, 07/08/2015 - 12:50

Call Summary: Challenges and Opportunites for Grantmaking in Mexico

As part of the Council’s global philanthropy program, this members-only conference call on July 1, 2015 provided an overview on policy developments in Mexico that are impacting the flow of U.S. philanthropy into the country. On the call, expert speakers delved into the implications for funders of a new anti-money laundering law, changes to the Mexican tax code, and the consequences of the U.S.-Mexico trade agreement. Foundation leaders also explained how they navigate the changed regulatory environment and highlighted a range of new resources on grantmaking in Mexico.

Members, Download the Recording of the Call

Call Summary

Michael Layton from the Instituto Tecnológico Autónomo de México (ITAM) spoke to the state of civil society in Mexico, the legal and regulatory history and atmosphere for grantmaking in Mexico, and what grantmaking organizations are doing to adapt to recent challenges. Layton explained that Mexican civil society faces a number of challenges: it is underdeveloped, lacks infrastructure and visibility, and there is public distrust of the sector. These two factors have two consequences: informality in giving among Mexicans (80% of Mexicans would prefer to give directly to individuals, as opposed to 16% who would prefer to give to organizations) and government inexperience and limited knowledge with the philanthropic sector.

Fortunately, Mexico continues to democratize and a growing middle class has increased local expectations of accountability, which has led several accrediting agencies to issue “grades” to organizations. Thanks in part to the efforts of U.S. foundations such as Charles Stewart Mott and Inter-American Foundation, Layton expressed optimism that a growing number of community foundations are appearing in Mexico. Additionally, corporate philanthropy is increasing and a growing population of wealthy Mexican philanthropists are contributing to a positive institutionalization of philanthropy.

Marc Owens from Loeb & Loeb discussed the reform of the Mexican Income Tax Law in 2010. Owens flagged concerns about the relationship between the tax law and a U.S.-Mexico Tax Treaty that allows U.S. grantmakers to fund Mexican Article 70-B charities as if they were 501(c)(3) organizations. The 2010 law shifted articles within the tax code and has created confusion over which Mexican charities may still be treated as equivalent to U.S. 501(c)(3) organizations for grantmaking purposes. He explained that the full implications of this law are still unclear and that many organizations are still struggling to comply.

Owens also discussed a 2013 anti-money laundering law designed to stem the amount of money laundered in Mexico. This law helped improve the score given to Mexico by the Financial Action Task Force (FATF), an intergovernmental organization tasked with reducing money laundering and terrorist funding worldwide. To align with FATF recommendations, Mexico included in the law strict oversight requirements for all “suspect” or “vulnerable” financial transactions. Recipients of “vulnerable” transactions, which include grants made to NGOs, must now regularly provide extensive documentation to the federal government, which includes some personal pieces of information that funders may not want to submit to a foreign government. The burden lies on the grantee to collect this information for the Ministry of Finance, which is challenging because non-compliance could result in fines that can easily cripple small nonprofits. It is also important that funders understand what is needed in order to help their grantees comply with the new law. Earlier this year, the Council on Foundations reached out to the U.S. Treasury Department to offer to convene Treasury and Mexican Ministry of Finance officials to discuss solutions for these problems grantmakers face in Mexico (see pg. 5 & 6 here) and will continue to work with government officials to try and improve the situation.

Windy Lopez-Afflito from the American Express Foundation and Joshua Mintz and Sharon Bissell Sotelo from the MacArthur Foundation discussed the ways in which their organizations are navigating this complex regulatory landscape in Mexico.

The MacArthur Foundation is working with their grantees to comply with the law by providing the new information required under the anti-money laundering legislation. The foundation has also worked with other grantmakers, including the Ford Foundation, Open Society Foundations, Fund for Global Human Rights, William and Flora Hewlett Foundation, and Sociedad Mexicana Pro Derechos de la Mujer (Semillas) over the last six months to produce a guide that can help grantmakers continue to do philanthropic work in Mexico, as well as support grantees to better understand what is required of them by the law (see ** links below with guide in both English and Spanish). Less than a third of the organizations in the region supported by MacArthur have requested the required institutional information necessary for compliance with the law, so there continues to be concerns about whether Mexican CSOs are aware of the law and able to comply.

American Express has been funding overseas for more than 150 years, including in Mexico. In response to the new legislation, they are now using a grantmaking intermediary to facilitate their Mexican grantmaking and ensure they can continue to support a robust grantmaking program into Mexico. Windy explained the range of strategic decisions around selecting an intermediary, once AmEx decided that the new legislation meant they would no longer make grants directly into Mexico. They considered a range of questions including looking at past experience working in the region, intermediaries' understanding of and effectiveness in Latin America, level of efficiency, and reputation. Other funders interested in working with an intermediary can see a list below of possible intermediaries who can help funders continue to work in Mexico, if they are unwilling or unable to comply with the new regulatory requirements.

Additional Resources

Possible Intermediaries

For more information about possible intermediaries working in Mexico, please reach out to the following COF members and partners:

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International Grantmaking Regulations

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Webinar Recording: Cross-Border Philanthropy Regulations and Current Challenges council-webteam Thu, 03/12/2015 - 15:35

Webinar Recording: Cross-Border Philanthropy Regulations and Current Challenges

Download a copy of the slides from this webinar.

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Sample Foreign Grant Expenditure Responsibility Letter

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Sample Foreign Grant Expenditure Responsibility Letter council-webteam Sun, 11/17/2013 - 16:45

Sample Foreign Grant Expenditure Responsibility Letter

Sample foreign grant expenditure responsibility letter.

This sample document is being provided for informational purposes and is not to be shared without the permission of the Council on Foundations. Use of the sample document does not create an attorney-client relationship, and the information provided is not a substitute for expert legal, tax, or other professional advice tailored to your specific circumstances. The information may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.

International Grantmaking Regulations

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