IRS Asked to Improve Tax Rules for International Grant Making

A committee of nonprofit experts that advises the Internal Revenue Service is recommending that the agency improve the tax rules governing international grant making.

“While the longstanding framework for cross-border philanthropy functions well, it can and should be updated to simplify compliance and clarify areas of uncertainty,” said a report by the Advisory Committee on Tax Exempt and Government Entities.

“Much of the guidance affecting cross-border philanthropy was provided long ago and fails to reflect developments of the past 15 or more years,” the report said. “As such, it does not address certain practices and structures that are common today.”

The report said that the committee believed that “a modest expenditure of IRS and Treasury administrative resources spent making updates to certain guidance will yield an exceptionally high return by reducing compliance burdens, improving charitable organizations’ ability to comply with our tax rules, and enhancing their ability to fulfill charitable missions beyond our borders.”

One committee recommendation is to simplify and enhance the application of the “expenditure responsibility” rules that private foundations follow when making grants to certain overseas organizations.