Equivalency Determination & Expenditure Responsibility

U.S. funders may encounter a situation where the desired grantee is not a registered U.S. 501(c)(3) nonprofit. For funders making grants overseas, this is an extremely likely occurrence. In these instances, there are a number of legal routes to successfully funding the organization. Two of the most prevalent are equivalency determination and expenditure responsibility.

These resources will help U.S. foundations and grantmakers understand equivalency determination, expenditure responsibility, and the requirements for funding non-U.S. 501(c)(3) organizations.

In-Depth knowledge on Equivalency Determination & Expenditure Responsibility

Legal issues arise when a private foundation makes a grant to an Initial Grantee that is not a 501(c)(3) organization or that re-grants the Foundation's funds to a Secondary Grantee that is not a 501(c)(3) organization. Most of those issues center around IRS expenditure responsibility rules: specifically, which organization—the private foundation or the Initial Grantee—is responsible for adhering to those rules, if any.

For international grants, the Pension Protection Act requires donor-advised funds to comply with certain rules imposed on private foundations. Sponsoring organizations administering international grants from advised funds have adopted various practices to comply with the new requirements. This article discusses these changes, along with a brief description of the new rules.