May 31, 2001 | Read Time: 2 minutes
By ELIZABETH SCHWINN
The Internal Revenue Service has issued a statement that could make it easier for private foundations to award grants to organizations outside the United States. The statement is intended to reduce the amount of paperwork foundations must do when awarding overseas grants.
Before the statement was issued, some foundations believed that if they made such grants, the I.R.S. would require them to prove that the recipient met the standards of charity status required under U.S. tax law, according to John A. Edie, senior vice president of the Council on Foundations, which asked the tax agency for the clarification.
But making such an “equivalency determination” sometimes took years, said Mr. Edie. Foundations had to collect financial records and other documents, as well as review the laws governing charities in the country where the grant would be made, Mr. Edie said. In addition, the documents had to be translated into English. The process was so expensive and time-consuming that some foundations had been reluctant to make grants to overseas groups, Mr. Edie said.
In its statement to the council, the I.R.S. clarified that foundations are not required to make an equivalency determination. Instead, the revenue service said foundations that wish to give money overseas need only exercise what is known as “expenditure responsibility” by obtaining detailed accounts from the grantees of how a grant is to be used. At the end of the year in which such a grant has been made, the foundation must tell the I.R.S. exactly how the money was spent and how much, if any, remains unspent.
Mr. Edie said the process should be easy for most foundations to follow since many already include such requirements as part of their general grant-making procedures.
He said the clarification from the Internal Revenue Service would lead to an increase in overseas grant making. Foundations have grown increasingly interested in making foreign grants but until now were unsure what procedures to follow, he said.
