Blog: Amplify

New Safe Harbor Procedures for Equivalency Determinations

Tax practitioners love “safe harbors” or specific guidelines that can be followed to ensure a taxpayer or exempt organization is in compliance with applicable tax law. For charitable organizations making grants internationally, September 14, 2017 was a good day because the IRS issued Revenue Procedure 2017-53 updating previous guidance on foreign public charity equivalency determinations (“EDs”) and giving us several preferred practices related to the preparation and issuance of EDs.

While the regulatory basis for EDs is already found in Sections 53.4942(a)-3(a)(6), 53.4945-5(a)(5) and 53.4945-6(c)(2)(ii) of the Treasury Regulations, this new Revenue Procedure provides a safe harbor by outlining components of a “preferred written advice” on which private foundations may ordinarily rely when making a good faith determination that a grantee meets Section 501(c)(3) and public charity requirements.

The Revenue Procedure also confirms that sponsoring organizations of donor advised funds (DAFs) may also follow this guidance.

Some of the components of “preferred written advice” that are most relevant to understand are:

  • English. Preferred written advice along with all attachments, must be in English.
  • More attachments explicitly required. The grantee’s organizing document (translated to English if needed) should be attached with support schedules, and translated foreign law relied on.
  • Terrorism. Verification that the grantee has not been designated a terrorist organization by the U.S. government.
  • Schools. Preferred written advice regarding a school FPCE grantee must confirm that the grantee does not discriminate on the basis of race, color, or national or ethnic origin, both by policy and in practice.
  • “Incubating” or new foreign charities. A foreign grantee in its first five years of existence may be treated as publicly-supported if the preferred written advice determines that, as of the time of the determination, the grantee can reasonably be expected to meet the applicable public support test.
  • Attach public support schedule. If the grantee has been existence for more than five years and is publicly-supported within the meaning of Section 170(b)(1)(A)(vi) or 509(a)(2), preferred written advice should attach support schedules.
  • Treatment of foreign charity and government gifts in public support test. Confirms that a foreign grantee’s public support includes contributions and grants from charities described in Section 509(a)(1), whether domestic or foreign. Grants from a domestic or foreign government, or international organization designated as such under 22 U.S.C. 288, also constitute public support.
  • Simplified update affidavits permitted. Rev. Proc. 2017-53 confirms that where a grantee has previously supplied an affidavit, an updated affidavit describing only material changes (along with the previously-supplied affidavit) may be relied upon.

The full text of Revenue Procedure 2017-53 can be found at:

We held a webinar on September 26 discussing how to determine whether to use equivalency determination or expenditure responsibility in your international grantmaking. Council members can view the recorded session online.

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