In a recent “Policy Update,” the Council on Foundations said it sent a letter to the Treasury Department’s Assistant Secretary for Tax Policy, Michael Mundaca, reiterating the Council’s request for a simpler process to determine if a foreign nongovernmental organization is the equivalent of a U.S. public charity.

According to Janne Gallagher, senior vice president and general counsel at the Council on Foundations—a membership organization for grantmaking foundations and corporations—the Council first filed a request with the Treasury Department to update IRS Revenue Procedure 92-94 a year-and-a-half ago.

The current procedure requires private foundations and supporting organizations of donor-advised funds to complete a significant amount of work to assure that their grants go to international nongovernmental organizations that are the equivalent of U.S. public charities, Gallagher said.

According to the vice president, private foundations currently must use one of two procedures if they decide to award grants outside of the United States:

• The organization must take on Expenditure Responsibility for the grantee.
• The organization must complete an Equivalency Determination.

“There are some situations where expenditure responsibility is not feasible,” Gallagher said, “so an equivalency determination becomes the only other option, and [it] is useful if making multiple grants to the same grantee.”

The process laid out in IRS Procedure 92-94 requires grantmakers to collect a “fairly significant” amount of information from prospective grantees, Gallagher said, and requires the grantor to develop an affidavit that includes multiple attachments, such as a copy of relevant laws where grantee is located translated into English, copies of grantee organization’s documents translated into English, and for many of the grantors, financial statements documenting that the grantee would pass a public support test to be considered a public charity by the IRS, if it were a U.S. entity.

The vice president said the Council has asked Treasury to revise Procedure 92-94 so that the Eligibility Determination process could be centralized within a single entity or repository—in this case TechSoupGlobal—the Council’s partner in the request.

“[TechSoup] would make a determination if in fact an entity is the equivalent of a public charity and issue a certificate on which grantmakers could rely,” said Gallagher.

Centralizing the process would also reduce overhead costs for foundations making international grants. Currently each foundation that wants to award grants to the same foreign nongovernmental organization must perform its own equivalence determination. By centralizing the process, the proposed revisions to Rev. Proc. 92-94 would eliminate this wasteful duplication, Gallagher said.

So what’s the delay?

The Treasury Department and the Internal Revenue Service currently have their hands full issuing guidance for the health care reform bill, said Gallagher.

“This is simply a reminder. We know that they are still looking at this, and they will get back to it once their decks are a little bit cleared,” she said.

For more information

The Council on Foundations is a national nonprofit association of almost 1,800 grantmaking foundations and corporations, including community foundations, independent foundations, operating foundations, public foundations, non-U.S.-based foundations, family philanthropists, and corporate philanthropists. The Council strives to improve sector effectiveness, accountability and stewardship. For more, go to www.cof.org.