Proposed IRS Rule Could Make International Grantmaking Easier

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Date: 
September 5, 2017

On Sept. 25, 2015, the U.S. Treasury Department issued final new rules for international grantmaking that are designed to lower the costs and administrative burdens of cross-border grants.  The rules, Reliance Standards for Making Good Faith Determinations, further strengthen the Council on Foundations and Tech Soup’s NGOSource, a central repository of information on foreign charities deemed to be the equivalent of a U.S. public charity (501(c)(3) organization).  Previous rules limited grantmakers to using equivalency determinations by their own legal counsel, rather than the information sharing the new rules enable. The final rules broaden the range of professionals on whose written advice a private foundation may rely for equivalency determinations for grants overseas. They also clarify that sponsoring organizations of donor-advised funds may rely on the rules for international distribution from DAFs, and narrow the circumstances in which a grantor can make use of a grantee affidavit to make a good faith determination of equivalency.

The rule allows grants to foreign charities if the foundation makes a good faith determination that the donee organization would qualify as a public charity in the U.S.  A “good faith” determination is defined as one “based on an affidavit of the donee organization or written advice from a qualified tax professional” that the donee is the equivalent of a public charity.  The affidavits or advice “must set forth sufficient facts concerning the operation and support of the donee organization for the Internal Revenue Service” to determine it is a public charity equivalent. 

The new rules expand the definition of a qualified tax professional that can conduct such a review to “an attorney, a certified public accountant, or an enrolled agent…”  Enrolled agents are defined by 31 CFR 10.2 and 10.3, which govern qualifications to practice before the IRS. Foreign attorneys would not be eligible unless they meet the requirements of a “qualified tax practitioner.”

In a statement on the organization's website, the Council on Foundations's President and CEO Vikki N. Spruill said, “These final regulations will allow foundations to confidently rely on equivalency determinations provided through shared repositories like NGOSource.”   

Additional information is available in the Council on Foundations’s explanation and analysis of the regulations.