Brown & Streza Blog
Oct 10

Written by: Casey S. Hale
10/10/2012 10:13 AM  RssIcon

The IRS recently released new proposed Treasury Regulations designed to ease the burden on private foundations engaged in international grant making. When making a grant to a foreign organization, the current Treasury Regulations require a private foundation to make a determination that the recipient organization is the equivalent of a U.S. 501(c)(3) organization or else exercise expenditure responsibility over the donated funds. To put it simply, every private foundation engaged in international philanthropic efforts must make an equivalency determination or exercise expenditure responsibility.

An equivalency determination is an time-intensive and often cost-prohibitive process. But there is a benefit to the process. After making an equivalency determination with regard to a foreign organization, a private foundation can generally make grants to that foreign organization on the same terms as a U.S. 501(c)(3) organization. That means that there are no mandatory periodic grant reports required from the foreign organization, the foreign organization does not have to maintain a separate account for the grant funds, and there is no detailed reporting required on the private foundation's IRS Form 990-PF

The proposed regulations are designed to make it much more time-efficient and cost-efficient for private foundations to make an equivalency determination. Under the current regulations, private foundations must have an affidavit from the foreign organization or an opinion of counsel that demonstrates that the foreign organization likely qualifies as a U.S. 501(c)(3) public charity. The proposed regulations replace an opinion of counsel with a written advice given by a qualified tax practitioner. A qualified tax practitioner means an attorney, a certified public accountant, or an enrolled agent, as those practitioners are defined in ยงยง10.2 and 10.3 of Circular 230.

Here is Secretary of State Hillary Clinton discussing the proposed regulations as a part of her comments at the launch of the State Department's Global Philanthropy Working Group. She addressed the proposed regulations starting at 1:39 and ending at about 3:50.

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