Expenditure responsibility is the federally mandated procedure that a private foundation—and some public charities—must follow for any grant made to an organization that is not a public charity. This chapter of Mastering Foundation Law: The Council on Foundations Compendium of Legal Resources focuses on the steps of expenditure responsibility when granting to non 501(c)(3) organizations.
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
Frequently asked questions about legal basics and anti-terrorism.
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.
The basics of equivalency determination and expenditure responsibility and when to use either option in global grantmaking.
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.
NGOsource helps U.S. grantmakers streamline and save in their international giving. NGOsource is a project of TechSoup and was started with support from the Council on Foundations.
Council explanation of the Department of Treasury and the IRS issued proposed regulations applicable to private foundations seeking to make grants to foreign organizations using equivalency determinations. The guidance broadens the range of professionals on whose written advice a private foundation may rely when making such grants. Previously, reliance on the written opinion of counsel of the private foundation or grantee was permitted. The proposed regulations expand that class of professionals to attorneys, certified public accountants, or enrolled agents who are subject to certain professional conduct rules of the IRS, thereby removing one key obstacle to the creation of an equivalency determination repository. The regulations were issued in proposed form but private foundations may begin to rely upon them immediately. While the regulations are not explicitly applicable to public charities engaged in international grantmaking, the guidance should pave the way for public charities as well.
Comments on Proposed Amendments to the Regulations Relating to Reliance Standards for Making Good Faith Determinations