1. Three Rs for
Successful International Grantmaking:
Regulation, Risk and Reputation
March 14, 2016
Presented by: Ted Hart, ACFRE, CAP®
CEO, CAF America

2. TED HART, ACFRE, CAP®
CEO at CAF America & President, of CAF Canada
Founder of ePhilanthropy Foundation
and Green Nonprofits
Radio Host- Nonprofit Coach (tedhart.com)
Author: Internet Management
People to People Fundraising
Nonprofit Guide to Going Green
Nonprofit Internet Strategies
Major Donors
Fundraising on the Internet
Welcome/Introduction

3. Charities Aid Foundation of America
(CAF America) is a global grantmaking
organization assisting corporations,
foundations and individuals. For over 24
years, we have been streamlining the
grantmaking process to eliminate risk and
administrative burden for our clients.
Through our work, we help donors support
great causes by assisting them in making
strategic, cost-effective and tax-advantaged
grants both internationally and domestically.
About CAF America

4. CAF Global Alliance
Worldwide Collaboration
CAF LOCATIONS:
• United States
• Canada
• Brazil
• United Kingdom
• Bulgaria
• Russia
• South Africa
• India
• Australia
Advisor Networks
• Asia Pacific
• Africa

5. We Understand Domestic
and International Grantmaking
*reflects giving for last five years through 7/15/15
*

6. Today’s Agenda
REGULATION, RISK & REPUTATION
Topics to be addressed:
• CAF Americas unique space in donor advised giving
•Challenges & roadblocks of international giving
• Ways to support international causes
• Restrictions when giving internationally
• Organizational vetting protocols &
IRS regulations
• Additional due diligence requirements
• Recent laws affecting international
philanthropy
• Best ways to mitigate risks

7. • Most countries do not have “IRS-like” databases of
approved charitable organizations
• Level of organizational vetting & compliance is more
complex and costly than when issuing grants in the
United States
• The barriers to ensuring that reputation will be protected
is much higher
Challenges Conducting International
Giving
It is imperative to understand United States law as it pertains to international
giving as well as the rules and regulations of the countries where the
grantmaking/program support will occur

8. • Make gift directly to organization (from the
United States), receive no tax benefit
• Make donation though a Donor Advised Fund,
and receive a tax receipt
• Utilize “in-country” funds to issue grants
3 Ways of Supporting International
Causes

9. What are the restrictions of giving
internationally?
• No political activity
• No substantial private benefit or
commercial purpose
• Care must be taken to direct
support to individual employees
Restrictions When Giving
Internationally

10. • No “earmarking”: No agreement, oral or
otherwise, that funds must go to predetermined
recipient or to recipient of donor’s choice.
• Must clearly inform donor that donor advised
fund has ultimate discretion/control over funds –
donor does not!
• IRS looks to reality, not just form:
• • Do we inevitably follow donor’s advice?
• • Do we provide our own expertise?
• • Are we serious about making sure grants
further our charitable purposes?
Restrictions When Giving
Internationally

11. What protocols have the IRS
approved to allow giving
internationally?
• Equivalency Determination (ED)
• Expenditure Responsibility (ER)
IRS Regulations for International
Giving

12. Equivalency Determination (ED)
• Equivalency determination is the method by
which a private foundation collects detailed
information on a foreign charitable organization
in order to determine whether or not it is the
equivalent of a United States public charity
described in Code section 501(c)(3).
*Please note that there are new regulations issued by the IRS in 2015

13. Equivalency Determination (ED)
Focused on Grantee as a Whole:
• Grant maker must make reasonable judgment/ good faith
determination that grantee meets U.S. standards
• Amendments to 26 CFR part 53 under chapter 42, subtitle D
of the Internal Revenue Code (Code). To avoid certain excise
taxes under chapter 42. www.cafamerica.org/latest-from-the-irs-new-standards-for-equivalency-determination/
• New Guidance: Qualified Tax Practitioners can provide
opinions to third parties and affidavits are no longer
considered sufficient to establish equivalency

14. Expenditure Responsibility (ER)
IRS Requirements and Penalty
• Pre-grant inquiry: “reasonable assurance” that
the expenditure is charitable
• Grant agreement restricts use of funds to
specific charitable projects
• Financial & narrative reports at least annually
& final cumulative report
• Reporting to IRS: Coming soon?
• 20% tax on amount of the grant if you get it wrong

15. Restrictions on Donor Benefits
25% tax on donor for any grant, loan,
compensation or similar payment to donor,
advisor or related parties (repayment required)
125% tax on other substantial return benefit
• Tickets, tuition credit, member dues, etc.
• Recognition for gift OK
• Round-tripping?

16. International grantmakers need to follow U.S.
laws and provide for additional compliance
checks, such as:
• USA PATRIOT Act
• Executive Order 13224
• HR4 (the Pension Protection Act),
• U.S. Treasury Department Voluntary Guidelines
for International Grantmaking
• Foreign Corrupt Practices Act
Additional Due Diligence
Requirements

17. Recently enacted and proposed laws are affecting the ways in
which companies conduct their international grantmaking in
such countries and international bodies such as:
• India
• Mexico
• China
• Russia
• E.U. Safe Harbor
Recent Laws Affecting
International Giving

18. WHAT IS IT?
India is the first country in the world to mandate corporate social
responsibility, by implementing CSR guidelines requiring companies
to spend 2% of their (in country) net profit on social development
HOW IS IT AFFECTING CORPORATE GIVING?
• Companies with a large presence in India have already/may
soon reduce their grantmaking to other parts of the world in
response to the amount of funds now being allocated to India
• Changing the way companies consider their philanthropic
strategies within the country
• Long-term implications are still unknown
India’s CSR Law

19. WHAT IS IT?
Due to concerns regarding the country’s issues around corruption
and drug-related money, Mexico places a very high level of burden
on grantmakers sending funds of $10,000 & greater to
organizations within the country.
HOW IS IT AFFECTING CORPORATE GIVING?
• The regulations require that comprehensive documentation be provided
to the government from beneficiaries about the donor
• The information needed by the Mexican government includes copies of
IDs such as passports of the head of the donor organization and other
sensitive information
• Failure to understand and comply with these requirements will prolong
the grantmaking process & perhaps have more negative consequences
Mexico’s Grantmaking
Regulations

20. WHAT IS IT?
As proposed, overseas NGOs would be placed under the supervision of
the public security bureau, rather than the ministry of civil affairs, which
traditionally deals with them. In order to register, NGOs would be
required to find a government agency to sponsor them.
HOW IS IT AFFECTING CORPORATE GIVING?
• While still in draft stage, the law could potentially have a significant
impact on companies already/wishing to issue grants within China
• It may also affect how existing charities operate within the country as
well as whether/how organizations attempt to register
China’s Proposed Overseas
NGO Management Law

21. WHAT IS IT?
The Russian government assesses a 24% “tax” on charitable
organizations receiving funding from donors outside the country
HOW IS IT AFFECTING CORPORATE GIVING?
• Some grantmakers may shy away from granting there.
Russia’s “Tax” on Grants to
In-country NGOs

22. • Within the EU, it is prohibited to send personal data outside of
the European Economic Area (EEA) unless there are adequate
arrangements and agreements in place
• Following a recent E.U. ruling, the Safe Harbor scheme is no
longer recognized as providing adequate protection for the
rights of EU individuals in connection with the transfer of their
personal data to signatories of the scheme in the USA.
• US organizations that collect, store or transfer personal data in
or from the EU will need to comply with the EU’s data-privacy
laws or risk sanctions from EU data protection authorities.
European Union Privacy Laws:
Safe Harbor

23. KEY POINTS TO CONSIDER:
• Utilizing a Donor Advised Fund is typically more cost effective
than creating foundations in local countries where your
company conducts business, thus enabling you to allocate
more funds/resources towards programs (and ultimately
desired outcomes)
• Establishing a donor advised fund through an intermediary
organization enables companies to dramatically mitigate their
risk, while protecting its reputation and adhering to all
government laws and legislation
Best Ways to Mitigate Risks
when Granting Globally

24. IRS tracks a long history of abuse
• “Donations” in lieu of tuition payments
• Grants for junkets or no charitable activity at all
Do not grant directly from a DAF scholarship awards
(or any other awards) to individuals
Equivalency Determination grants to charities for
scholarships are OK, so long as grantee selects
recipients “completely independently”
• No grantee rep or donor/advisor rep on
selection committee
• No non-charitable constraints (e.g., requirement that
only corporate executive children need apply)
Scholarship Programs

25. QUESTIONS?

26. CAF America – HQ
1800 Diagonal Road, Suite 150
Alexandria, VA 22314
202.793.2232
Ted Hart, ACFRE, CAP®
Chief Executive Officer, CAF America
tedhart@cafamerica.org
www.cafamerica.org
Thank You!
CAF America – West Coast Office
50 California Street, Suite 1500
San Francisco, CA 94111
415.439.5347