FAQ

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Equivalency Determination

  • ED is expressly available (per U.S. tax law) for non-U.S. organizations that are equivalent to U.S. public charities. NGOsource will also issue legal opinions – similar to EDs – verifying that an organization is a “foreign government agency or instrumentality,” by applying a set of facts and circumstances promulgated by the IRS. For more information on this topic, see our article on government entities.

  • Equivalency determination (ED) is a process dictated by U.S. tax law regulations that permits a U.S. private foundation or donor-advised fund to make a good faith determination that a non-U.S. organization is the equivalent of a U.S. public charity or operating foundation. An equivalency determination permits the private foundation or donor-advised fund to make a grant to such non-U.S. organization such that the payment is a “qualifying distribution,” and a grant for which expenditure responsibility (ER) is not required. To make this determination, a qualified reviewer collects and analyzes detailed information about a non-U.S. organization’s operations and finances (when required) and, based upon this information, may make a determination that the organization is equivalent to a U.S. public charity.  

    Read "What is equivalency determination?" for more details.

  • NGOsource is designed for U.S. funders that make grants or distribute funds to a non-U.S. organization that has not received a ruling or determination letter that it is a U.S. public charity. These funders include, but are not necessarily limited to, private foundations, corporate foundations and donation programs, independent foundations, community foundations, donor advised funds, family foundations, re-granting organizations, philanthropic service providers, "friends of" organizations, U.S. government agencies, public charities and individual donors. Funders use EDs as a means of lessening and/or eliminating restrictions on a non-U.S. organization’s use of funds. 

  • To comply with U.S. tax laws, regulations, and requirements, including avoiding tax penalties, certain U.S. funders (including private foundations) must ensure that their funds are used solely to further their charitable purposes. One way to do this is by making grants to U.S. public charities. Public charities are subject to a thorough evaluation by the U.S. Internal Revenue Service (the “IRS”) to ensure that they are organized and operated exclusively for charitable purposes. In doing so, the IRS looks at the types of support an organization receives and the nature of its activities. While it is possible that some foreign organizations might seek public charity status directly from the IRS, most do not due to the financial and administrative burden associated with this process.

    U.S. funders, including private foundations, can treat a non-U.S. organization as equivalent to a U.S. public charity if the non-U.S. organization goes through the ED process. Once a non-U.S. organization has been certified as the equivalent of a U.S. public charity, a funder may make grants to the non-U.S. organization in the same way it would to a U.S. public charity. This is one very important way that a grantmaker can ensure that its grants to foreign organizations comply with U.S. tax laws without having to go through a more burdensome and time-consuming process called “expenditure responsibility,” or “ER.”

  • An ED is based on a set of detailed information about the organization's operations and finance.  Specifically, a non-U.S. organization is deemed equivalent to a U.S. public charity if it meets this three prong test:

    1. It is organized like a U.S. public charity;
    2. It is operated like a U.S. public charity; and
    3. It meets certain minimum public support requirements (if required).

    For more information on these concepts, see our LegalEASE blog.

The NGO's Experience

  • To help prepare your potential grantees feel free to use the prescreening questions below. It provides a framework to help you assess which organizations are more likely than others to be ready for the ED process. Please keep in mind, the questions cannot conclusively determine whether or not an organization will qualify for an ED but it can serve as a guide for you and the grantee.

    1. Is the organization already registered with the IRS or does it have a U.S. office? Grantmakers can search Guidestar to see if the organization is listed there. EDs are necessary for international organizations. If the organization has a U.S. presence, please contact us for more information to see if an ED is necessary.
    2. Is the applicant an organization, as opposed to a program or project with no formal organizational structure? Applicant must be an organization to qualify.
    3. What is the nature of the applicant’s overall activities; what is its mission and purpose? Applicants must be required to engage primarily in charitable purposes.
    4. Does it seem charitable and/or does it seem to serve the general public?
    5. Does the grantee engage in any activity involving the election of public officials? If they engage in any amount, the applicant will not qualify.
    6. What happens to the organization’s assets upon dissolution?

       

  • After receiving introductory emails from the grantmaker and NGOsource, the NGO representative will log in to the questionnaire using a username and password. Then, the representative must complete a questionnaire which collects information required by U.S. law for the ED analysis. The NGO must also provide certain legally required documents, including governing documents translated into English and detailed financial information.

    The NGO is supported during the process by one of our global partners. Upon completion of the questionnaire, the NGO will receive an email verifying that NGOsource has received the information. The NGO will be contacted after this point only if our experts determine that further information is required.

     

  • Your intended grantee will be assigned to one of our global partners, which will provide customer support by email and phone and, whenever possible, in the NGO's language. The NGO may also refer to our FAQ for more information about the ED process, deadlines, completing the questionnaire, and the documentation requirements.

    If your NGO's email or internet access is unreliable, we provide other options for completing the questionnaire.

  • NGOsource supports English, Spanish, French, Portuguese, and Mandarin Chinese. We will continue to add other languages in the future, based on international grantmaking trends and on demand from NGOsource members.

  • U.S. law requires that the NGO's governing documents be in English. NGOsource members and their intended grantees may choose any translation service or method and must cover the costs of the translation themselves. As is required by the IRS, NGOsource will conduct its ED review based solely on the translated governing documents provided by the NGO and will not be responsible for verifying the accuracy of the translation.  NGOs may contact us if they need assistance in obtaining a translation and we can introduce them to a translation service.

     As is required by the IRS, NGOsource will conduct its ED review based solely on the translated governing documents provided by the NGO and will not be responsible for verifying the accuracy of the translation.  NGOs may contact us if they need assistance in obtaining a translation. If needed, NGOsource can introduce NGOs to a translation service.

  • Once the NGO's staff has completed and submitted its questionnaire, they are not able to go back and edit the responses. If changes need to be made, the NGO's staff should contact NGOsource.

  • After NGOsource or one of its Global Partners sends the NGO an introductory email, the NGO will have up to 2 weeks to complete the questionnaire and submit its documents. This time frame takes into consideration the technological limitations that many NGOs face. During this period, the global partner assigned to the NGO will send regular reminders to log in. If an extension is needed, the NGO is encouraged to contact the support staff to request an extension.

    During this critical phase, if the NGO is persistently unresponsive, NGOsource will contact the grantmaker to inform them of the situation. We will usually ask the grantmaker to help by reaching out directly to its intended grantee to encourage the NGO to take action.

  • Whenever possible, we ask the NGO to complete its questionnaire online. However, because access to technology and the internet varies widely internationally, we have designed our service so that unreliable, infrequent, or slow email or internet access will not negatively affect an NGO's ability to successfully complete its questionnaire or its opportunity for ED certification.

    An NGO with limited internet access can go online to print the questionnaire after answering a few screening questions. Or, if internet access is nonexistent, the NGO may ask its NGOsource global partner to mail or fax the questionnaire. In either case, the NGO can complete the questionnaire by hand and mail or fax it to the partner, along with the required documents. The NGO may also submit its answers to the questionnaire by phone through the global partner.

    Grantmakers can help by letting us know if the NGO has unreliable internet or email access when making the initial ED request. They can also encourage such an NGO to use the print or mail option to return the questionnaire. Due to our efforts to accommodate NGOs with limited technology, it is possible that these types of ED requests will take longer than the average of 4 to 6 weeks.

  • NGOsource consults with the grantmaker extensively to decide how to move forward. If the grantmaker decides to terminate the ED request and the NGO has still not logged into the questionnaire, the ED fee will be refunded.

Services and Benefits

  • Expenditure responsibility (ER), a more restrictive alternative to ED, is simply too specific to each grantmaker's particular grant agreement/program needs with an NGO. ER also requires extensive record keeping and reporting on the part of the grantee during the grant period, specific to the grant. Thus, there are few economies of scale available to effectively reduce costs to the grantmaking community. However, if during our due diligence we are unable to reasonably qualify a foreign organization for equivalency, we will provide the requesting funder with a file of information such that the pre-grant inquiry for your ER grant should be expedited. We may also provide limited ER services upon specific request, as we are in the process of determining whether this would be of benefit to the sector. For more information, please contact us

  • No. NGOsource does not provide grants or assist with fundraising. We encourage grantseekers to visit the Foundation Center, which offers a wealth of resources for grantseekers, including information about international grants.

  • No. NGOsource focuses on satisfying the legal requirements associated with ED and supporting strong relationships between grantmakers and their intended grantees by facilitating a streamlined ED process. NGOsource does not evaluate the effectiveness or programmatic quality of the NGO because it is not a legal requirement for ED. Grantmakers should connect with their grantees directly to discuss the programmatic expertise and services they provide and to evaluate their programs.

  • Using NGOsource helps centralize, standardize, and streamline the ED process, which benefits the entire philanthropic community. Because grantmakers often have overlapping needs, grantmaker members benefit from our discounted rates.

    NGOsource also improves the intended grantee experience because our global partners offer superior NGO support, interacting with NGO staff in their own language and during their office hours whenever possible. Additionally, by centralizing the process, NGOs need only complete the ED process once for multiple grantmakers, freeing up time to do important programmatic work.

  • Because current legal obligations do not require audited financial statements for ED, we do not verify the accuracy of such information provided by the NGO, unless we have a reason to know the information we have received is erroneous. However, we always analyze the financial data provided by the NGO and check for reasonableness and consistency.  In addition, the foreign organization certifies the accuracy of the information provided to us upon submission. 

  • NGOsource does not currently conduct USA PATRIOT Act OFAC list and terrorism checks as they are not legal requirements for ED. Although we may in the future conduct checks on organizational names only, as a matter of practice, we nevertheless recommend that such checks be additionally conducted by the grantmaker before making international grants, especially since the OFAC sanctions constitute a strict liability regime. We have found that funders’ risk assessment and due diligence standards vary considerably in this area. For more information, visit the US Department of Treasury website.

ED Standards and Liability

  •  

    Premier tax law firm Caplin & Drysdale has written a legal opinion stating that grantmakers can fully rely on NGOsource equivalency determinations to meet their IRS requirements for international grants. The legal opinion is available to grantmakers upon request and pursuant to a nondisclosure agreement. To request a copy, please contact accountsupport@ngosource.org.

    In September 2015, the U.S. Department of the Treasury and Internal Revenue Service issued final rules on equivalency determinations (EDs). These rules finalize the proposed regulations first issued in September 2012, upon which experts have been relying in the interim. The final regulations further strengthen grantmakers’ ability to confidently rely on EDs provided through our repository because they strongly affirm the unique approach that NGOsource has taken to provide ED repository services from the time we launched. Specifically, the regulations reinforce NGOsource’s decision to staff our ED repository with qualified tax practitioners (QTPs), i.e., the attorneys in charge of our legal review process.

  • NGOsource adheres to IRS ED standards for a U.S. public charity as prescribed by the applicable IRS regulations. What is — and isn't — included in NGOsource's ED services is largely determined by the IRS and U.S. federal law.

  • NGOsource's team — which includes qualified, highly trained tax practitioners and legal counsel — reviews and analyzes the NGO's information and issues the ED. Learn more about the NGOsource team.

The ED Request Process

  • NGOsource members are able to search our online database at any time to view the current ED status of specific NGOs. This information is available only to NGOsource members and not the general public. For privacy reasons, members may not see which grantmakers initiated an ED request. However, feel free to contact us at NGOsource with specific questions about a particular ED request you have pending, at accountsupport@ngosource.org.   

  • NGOsource members can always see the status of their ED requests as they are being processed, but not the status of ED requests by other grantmakers. Once an ED has been completed by NGOsource, the new certification status and expiration date will be visible to all NGOsource members.

  • The average turnaround time for NGOsource to complete an ED is 4 to 6 weeks. This time is primarily determined by the responsiveness of the NGO, which varies widely.

    As part of our streamlined and legally compliant ED process, we ask grantmakers to introduce their intended grantees to NGOsource. Subsequent determinations of NGOs that have been previously certified by NGOsource take significantly less time. In contrast, our research indicates that the average ED processing time using resources besides NGOsource ranges from several weeks to a few months.

  • ED Requested - Payment Received 
    •    MEANS: we have received your payment for the ED
    •    NEXT STEP: We will contact the NGO to initiate the ED process

    NGO Invited - Awaiting Response
    •    MEANS: An invitation email was sent to the NGO, asking them to fill out the questionnaire
    •    NEXT STEP: The NGO must fill out the questionnaire

    Questionnaire in Process
    •    MEANS: The NGO has begun filling out the questionnaire
    •    NEXT STEP: We await return of the completed questionnaire

    Questionnaire Submitted - In Review
    •    MEANS: The NGO has submitted the questionnaire
    •    NEXT STEP: We will check the questionnaire and contact the NGO if more information is needed

    NGO Contacted - Clarification Needed
    •    MEANS: We’ve contacted the NGO to get clarification or more information
    •    NEXT STEP: We await clarification from the NGO

    ED Completed:
    •    MEANS: Legal review has been completed
    •    NEXT STEP: If the NGO has been certified, you will find your documents available on the Grantmaker Portal 

     

  • Typically, unresponsiveness by the intended grantee (for a multitude of reasons, such as unavailability of key staff due to program deadlines or vacation) is the most likely cause of delay. NGOsource works with both the grantmaker and the NGO to find solutions to these obstacles.  

  • NGOsource offers four-week expedited equivalency determination (ED) reviews. The fee to expedite is $500. However, this fee is based solely on the successful completion within four weeks; NGOsource will not charge the grantmaker if it takes longer than that, regardless of who causes the delay. During our peak periods, such as end of year and midyear, we must limit expedited service. So this service may not be available during those times.

    In order to accomplish such a fast turnaround, we have to require that the NGO provide all information and documentation within two weeks. If the NGO cannot or does not do so, then the expedited status will be canceled and we will not charge the expedited fee unless we do manage to complete the ED within four weeks anyway.

    If you'd like your ED review expedited, simply let us know in the “Special Instructions for NGOsource Staff” field when submitting the ED request through our online Grantmaker Portal, or contact us.

  • NGOsource members can log in to the Grantmaker Portal at any time to check the status of their ED requests. Statuses are shown in aggregate format in a graph, and members can drill down to see further details about individual ED requests. Additionally, NGOsource sends an email to a grantmaker’s designated primary contact whenever further assistance is needed. If you have questions about the status of a specific ED, please contact accountsupport@ngosource.org.

  • Grantmakers receive an email when the determination is made. Grantmakers are also able to check the status of their ED requests at any time using the Grantmaker Portal.

Making the Determination

  • The four most common reasons that an NGO cannot be certified as a public charity equivalent under U.S. law are: (1) political activity, (2) excessive lobbying, (3) improper dissolution clauses, and (4) failure to meet public charity financial support requirements. In addition, NGOsource will be unable to issue an ED if the NGO is not responsive to NGOsource’s requests for information or fails to provide all required materials.

  • If a grantmaker’s intended grantee cannot be certified, NGOsource will notify the grantmaker. The grantmaker then determines how to handle communication with the NGO about not being found equivalent to a U.S. public charity (thus not getting certified for an ED). At this point (1) the NGO may be able to immediately resolve the issue; (2) it may take further guidance and more work by the NGO to reach ED certification; (3) the grantmaker may not wish to continue the process; (4) in some cases the NGO may not be able to remedy the issues or it may otherwise prove impractical.

    If the NGO resolves the issue immediately after a single follow-up, NGOsource will issue an ED at the regular rate. When the NGOsource legal team confirms that they cannot certify an NGO based on the current facts, NGOsource will follow up once with the grantmaker and NGO to see if the necessary action to become ED certified is something the NGO can resolve immediately. If this last guidance and the NGO response resolves the issue immediately, then NGOsource will issue an ED certification for that NGO.

    If ED resolution requires additional time and the grantmaker wants to continue, NGOsource may extend services by offering limited support at a fixed rate to cover our costs..

    Alternatively, if a grantmaker wishes to make a grant to an NGO that could not be certified, it can consider using the expenditure responsibility (ER) process. NGOsource does not provide support for the ER process. Although NGOsource does not provide support for the ER process, in many cases we can provide information collected from the NGO to support a grantmaker’s pre-grant inquiry for ER. Please contact us for more information.

  • Unfortunately, no. The cost is the same, regardless of outcome. To reach a determination, NGOsource and its partners apply the same quality of research, analysis, and support to all requests. A denial of certification in fact usually results in more time and effort on our part since we make every effort to find an organization equivalent before denying certification.

  • The four most common reasons that an NGO cannot be certified as a public charity equivalent under U.S. law are: (1) political activity, (2) excessive lobbying, (3) improper dissolution clauses, and (4) failure to meet public charity financial support requirements. In addition, NGOsource will be unable to issue an ED if the NGO is not responsive to NGOsource’s requests for information or fails to provide all required materials.

ED Certificate and Documentation

  • An electronic or hard copy of the ED Certificate and accompanying paperwork is the only record that a grantmaker needs for legal purposes and regulatory compliance. The certificate is issued in the name of the NGOsource member and cannot be shared outside the member organization.

    Certificates and accompanying documentation are available through the Grantmaker Portal as a PDF and may be printed or downloaded. We encourage you to print or download the ED Certificate during the validity period, as certificates are automatically generated as of the date of the information on file. For this reason, a certificate generated after the validity period may no longer contain the information available at the time of its initial validity. (For example, if an organization changes its name, a certificate generated after the name change will include only the new name.) You will not need to keep other diligence materials, though you may refer to them via the Grantmaker Portal.

  • The validity period is dictated by law and will be clearly shown on the ED Certificate. The validity period for an ED is usually two years from the end of the last fiscal year for which financials are reviewed.  Therefore, we encourage grantmakers to make requests at least 30 days after the NGO’s fiscal year end, giving the NGO time to finalize their financials. For example, if financials are received through 2018 we can extend their ED to 2020.

  • Yes. Both the primary and secondary contacts on the grantmaker account will receive email notices well in advance of the expiration date. Grantmakers need to keep contact information up-to-date so as not miss these important emails.

    Once the ED Certificate has expired, grantmakers will see an “Expired” status with an option for renewal next to the NGO’s name in the Grantmaker Portal.

  • According to U.S. law, unless the ED is certified and valid at the time of a grantmaker’s grant payment, another grantmaking method will need to be utilized. If the ED Certificate  expires before a grantmaker’s next grant payment, we recommend that the grantmaker request an ED renewal at least 2 months in advance of the next grant payment.

  • Grantmakers may access the governing and financial documents of their grantees via the online Grantmaker Portal. Certain personally identifying information contained in these documents may be redacted in order to comply with international privacy laws. Such information is not necessary for the ED to be valid or relied upon.

  • Unfortunately, no. Each ED Certificate is valid only for the NGOsource member named on the certificate and is not transferable. However, if an ED certification in NGOsource's database is valid at the time of another grantmaker’s request, they may be able to get their own ED for the same NGO for only $250, our ED processing fee for NGOs that are currently certified.

Membership

  • Yes. Using NGOsource's ED services helps all grantmakers determine with confidence the eligibility of a foreign NGO. However, bear in mind that ED Certificates can only be issued in the name of the NGOsource grantmaker member and the payer of the grant funds.

    We recommend that DAFs contact us to discuss their interest in NGOsource.

  • Yes. Although individual donors are not subject to the same tax requirements as other grantmaking entities, we welcome individuals who would like the extra level of diligence that ED provides. Individual donors should be aware that when NGOsource certifies a non-U.S. NGO as equivalent, it doesn’t mean that the NGO becomes registered as a U.S. public charity, nor that gifts to it will be tax-deductible. In general, U.S.-based individual donors do not receive the tax benefits of giving to a 501(c)(3) public charity when making direct gifts to ED-certified non-U.S. NGOs. Donors should consult their tax advisors.

    If you're ready to join, apply now.

  • NGOsource's cost-effective ED services help make it possible for grantmakers with few or no staff to make grants to the NGOs that matter most to its donors and trustees, regardless of where they are in the world. NGOsource allows small grantmakers to keep operational overhead to a minimum while enhancing philanthropic efforts by facilitating grants to international NGOs.

    If you're ready to join, apply now.

  • Yes. EDs provide an extra level of diligence for a nonprofit's grantmaking activities.

    If you're ready to join, apply now.

  • NGOsource is designed for U.S. grantmakers making grants to non-U.S. NGOs that are not registered as U.S. public charities. These grantmakers include private foundations, corporate foundations and donation programs, independent foundations, community foundations, donor advised funds, family foundations, re-granting organizations, philanthropic service providers, "friends of" organizations, U.S. government agencies, public charities and individual donors.

    If you are a grantmaker that does not fit the types listed above, please contact us.

    If you're ready to join, apply now.

  • Yes. However, please bear in mind that ED Certificates can only be issued in the name of the NGOsource grantmaker member, which should be the payer of the grant funds. Therefore, if a philanthropic service provider will not make grants to NGOs itself, it will need to set up an NGOsource membership for each of the grantmakers it serves, even if they are making grants to the same NGO. On the other hand, if the philanthropic service provider is the payer of the grant funds, it will only need one membership for itself.

    We recommend that philanthropic service providers contact us to discuss their interest in NGOsource.

Pricing

  • Grantmakers pay an annual membership fee based on the number of EDs they expect to request in a year and an ED processing fee for each ED request.

    NGOsource is focused on keeping grantmaker costs to a minimum. Fees cover the actual costs of processing an ED request, including the cost of supporting the NGO as it completes its NGO Questionnaire. More information is available on our Pricing page.

    If you're ready to join, apply now.

     
  • NGOsource is operated by TechSoup, a 501(c)(3) nonprofit organization, with a focus on keeping the cost of equivalency determination to a minimum. Our fees are competitive and significantly less than the typical cost of external legal fees, which can range from to US$5,000 to US$10,000 per ED. While EDs may be available at lower prices, such EDs may not be fully compliant with IRS regulations, do not account for the costs of program and finance staff time, and often provide little to no NGO support.

  • Whether a grantmaker makes dozens of international grants each year or just a few, we offer a membership level that is right for every organization.

    The appropriate membership level is based on the number of EDs a grantmaker expects to request in a year. The average number of international grants a grantmaker has made over the last 3 years usually provides an accurate estimate of its annual ED needs. Once a grantmaker has an estimate, it can refer to the Membership Fee information on our Pricing page to find the membership level that best corresponds to the estimated number of EDs.

  • A grantmaker may request more than the number of EDs that are associated with its membership level at the same per ED fee. However, the overall costs will be lower if a grantmaker joins NGOsource at the membership level that is appropriate for its ED needs in the coming year. More information is available on our Pricing page. Please contact us if you have any questions.

  • Grantmakers can request a renewal at any time after the initial ED has been processed and completed, regardless of expiration date. 

  • Because by law EDs cannot be shared, NGOsource can only issue an ED Certificate in the name of one grantmaker. Each ED Certificate is valid for only the named NGOsource grantmaker member. Other grantmakers may join NGOsource and request an ED for the same NGO in their name at any time. The fee for the subsequent request will be either the $250 fee for currently certified NGOs or the $850 fee for NGOs whose ED certificate has expired, depending on the timing of the request.

Privacy and Data Security

  • NGOsource is hosted on secure enterprise servers. All internet data transmissions are implemented with Secure Sockets Layer (SSL). Please contact us if you have specific questions.

  • NGOsource recognizes that there are often legitimate safety and security concerns of NGOs and grantmakers due to the nature or location of their work. We are committed to protecting the information entrusted to us.

    NGOsource uses a secure technical infrastructure and restricts access to data so that only NGOsource members are able to access our information about certified NGOs. To ensure the legitimacy of grantmaker members, all membership applications are reviewed by NGOsource staff. Grantmaker members are only able to see an NGO's name, country, and ED status. An NGO's detailed information — such as list of activities and budget — is only available to grantmakers who request, pay for, and receive an ED for that NGO. Personally identifiable information (such as individual contact names and email address of such individuals) are only available if specifically consented to by the NGO.

    Only personnel at TechSoup, which operates NGOsource, have regular access to an NGO's information. The NGOsource partner assigned to an NGO has access to the NGO's information only while it is supporting that NGO as it completes its questionnaire. Any statistics we share publicly about our ED services express data in aggregate only.

    An NGO also has the right to decline to provide information for an ED request; however, this will prevent NGOsource from making an ED. After the NGO has had an ED certified by NGOsource, grantmaker members can access information about the NGO by requesting an ED. At any time, an NGO can contact NGOsource to make their information inaccessible to other grantmakers, but doing so will cause the NGO’s ED to be no longer visible in the repository. 

    Please contact us if you have specific concerns, or review our Privacy Policy.

Definitions and Terminology