Legal Changes for Mexican NGOs Add Complexity

The NGOsource legal team keeps close track of legal changes that impact equivalency determinations (EDs) and international grantmaking in countries around the world. We found that changes to NGO laws in Mexico now make it more difficult for the nonspecialist to evaluate Mexican NGOs for an ED. Our NGOsource team has always applied this high level of scrutiny, so our ED process already includes such a review.

Recommendation

Mexico is the second most common jurisdiction where we review NGOs for EDs. Since its launch in March 2013, NGOsource has performed 57 EDs in Mexico to date. We recommend that you exercise caution here—with these changes only a specialist in this area should review a Mexican NGO for an ED. The shared resources of NGOsource are intended to work for the benefits of our members and to save them from having to know every change and nuance of NGO laws that could affect their giving abroad.

Background: NGOs under Mexico Law

Mexico is a civil law country that primarily recognizes different types of nonprofit, nongovernmental forms of organizations, although at NGOsource we most often see (1) civil associations (the AC), and (2) civil society organizations (the SC).  These types of organizations may seek certain benefits if they register under the Income Tax law as an “Authorized Donee” and/or the Law for Promotion of Civil Society Organizations.

In Mexico, an organization registered as an “Authorized Donee” has historically been presumed to be equivalent to a U.S. public charity. However in January 2014 the applicable laws changed. For purposes of equivalency of an Authorized Donee, it must be carefully examined with regard to lobbying. These changes further support the importance of a case-by-case analysis and determination.   

Recent Changes to Such Laws

Some of the recent legal changes include the amendment and renumbering of the former Article 97 to new Article 82 of the Mexican Income Tax Law (many of us know Article 97 as the Authorized Donee Law).  Most notably, organizations are now expressly permitted to lobby.  Of course under U.S. tax law, a public charity (or its equivalent) can only lobby an insubstantial amount. For purposes of EDs and international giving, this means that an Authorized Donee’s governing documents and operations must be carefully examined to confirm whether its lobbying activities rise to the level of risk.

The good news is that we have found most organizations registered as Authorized Donees still qualify as U.S. public charities; however there is a stricter amount of scrutiny required when making these determinations than before. We have also found that organizations registered under the Promotion Law have an increased chance of an ED determination.

NGOsource EDs in Mexico

Mexico is a popular jurisdiction for U.S. funders. We actively engage with our partners in Mexico to ensure we are knowledgeable about changes that might impact international giving and are improving our processes to best reach Mexican NGOs. For instance, the NGOsource Questionnaire, which is completed by the NGO as part of the ED process, is available in Spanish to streamline efforts to gather information from the organization. 

Our Native Partner in Mexico

The NGOsource team collaborates closely on every Mexico ED with Centro Mexicano para la Filantropía (Mexican Center for Philanthropy), known as CEMEFI, TechSoup Global’s Mexico partner.   

This partnership and other resources available to NGOsource help to ensure a streamlined ED process for the NGOs as well as the grantmakers. Discover how NGOsource can save you time and offer reassurance. Read about our model or sign up.

Saerin Cho is assistant counsel at NGOsource. She works with senior counsel to review legal issues that arise in equivalency determinations and to provide tax and legal guidance to the organization at large. She holds a JD and LLM in taxation from University of San Diego School of Law.

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