We discussed in an earlier post how the IRS recently proposed new regulations that will make it easier for private foundations to obtain equivalency determinations for foreign grantees, and avoid the expenditure responsibility process. An important change within the proposed rules would allow private foundations to base a determination of a foreign organization’s equivalency status on an opinion of a qualified tax practitioner and not necessarily of a foundation’s own attorney. This means is that an equivalency opinion authored by a qualified tax practitioner could potentially be used by many different foundations—eliminating the current inefficiencies and expense of different organizations requesting the same information from foreign organizations.
Last week, NGOsource offered a demonstration of its equivalency determination repository service, which was developed in tandem with the changes to the regulations and will launch on Monday, March 18. NGOsource is a project of the Council on Foundations and TechSoup Global, and it will provide private foundations with a mechanism to utilize equivalency determinations that already have been prepared—and request determinations as needed for organizations that haven’t yet been evaluated.
Essentially, NGOsource is a membership service that allows its private foundation to members to search a database to see if an equivalency determination has been prepared for an organization. If not, there is a mechanism for the foundation to request that a determination be prepared. Similarly, if a determination has previously been prepared for a foreign organization but has expired, a foundation can request a renewal (which would be more abbreviated process than a first-time determination). NGOsource handles making the necessary inquiries of foreign organizations through its global partners, and then NGOsource’s own legal team evaluates the information to decide if an equivalency determination is appropriate. Determinations will be effective for one year beyond the end of the fiscal year in which the determination was first completed.
NGOsource has the support of many large private foundations, and has been evaluated as meeting the requirements of the regulations by an attorney who formerly served as director of the IRS exempt organization division. Essentially, a repository service like NGOsource will offer consistency and convenience, and should lower the cost and burden on both grantmaking foundations and foreign grantees. The hope is that this will encourage more foreign grantmaking by freeing up staff time to deepen relationships and monitor how funds are being used. It is important to note that NGOsource does not evaluate or rate a foreign grantee’s efficiency or success as an organization—it is merely determining whether the organization is the equivalent of a United States public charity. It is still the responsibility of grantors to monitor grant funds and make sure that grantees are meeting requisite benchmarks.
Visit the NGOsource website for more information about the service.
(Photo courtesy of U.S. Friends of Orphans and Vulnerable Children)