Thanks to a generous grant from the Gordon and Betty Moore Foundation, NGOsource has obtained an outside legal opinion confirming our repository’s alignment with current legal requirements. The opinion both bolsters our existing process and offers advice to ensure continued consistency with Revenue Procedure 2017-53. As always, NGOsource’s EDs reflect best practices through a combination of thoroughness, international legal expertise, and technological innovation.
In 2009, when NGOsource was in its early development, we obtained a legal opinion from an outside law firm confirming that our repository approach, as well as certain operational elements and positions taken, would likely withstand scrutiny under audit by the IRS. Since that time, the Treasury Department has issued final regulations on foreign public charity equivalency determinations, and the IRS has issued a new Revenue Procedure (Rev. Proc. 2017-53) setting forth what it calls “preferred written advice” on which grantmakers may rely in making good-faith determinations on equivalency. Given the evolved legal requirements and recommendations, we took this opportunity to confirm our practices and determine whether and to what extent we are meeting the optional “preferred written advice” standard.
While the legal opinion is issued to NGOsource (as a program of TechSoup), we know that many of our grantmakers will be pleased to hear that the opinion confirms that various elements of our current approach remain solidly within legal guidelines and best practices, including our method of evaluating whether a school (deemed equivalent under sections 501(c)(3) and 170(b)(1)(A)(ii)) follows a policy of racial non-discrimination in any particular country. We are more than happy to speak individually with any of our grantmakers who would like more information on these and other aspects of the legal opinion.
One notable new addition to our ED service, which we hope to unveil by the end of the year, will be a limited list cross-check on the name of the organizational grantee to help grantmakers obtain more information of potential use to their grantmaking programs. This added service will further align our EDs with the “preferred written advice” standard. Among the new recommendations of Rev. Proc. 2017-53, the IRS stated that
“[p]referred written advice includes verification that the grantee has not been designated or individually identified as a terrorist organization by the United States Government as described in § 501(p)(2).”
NGOsource plans to begin running the name of the NGO for whom an ED has been requested through a third-party verification service that will confirm whether the organization itself appears on either the Specially Designated Nationals and Blocked Persons (“SDN”) List or the Terrorist Exclusion List, maintained by the Office of Foreign Assets Control (“OFAC”). This information will be provided to our grantmaker members along with the ED, noting the date on which the lists were checked. We must emphasize that this additional service will NOT relieve grantmakers of the requirement that they themselves perform checks on BOTH the organization’s name AND the names of controlling directors, officers, and trustees until the grantmaker is satisfied that it is not funding terrorist individuals or operations. OFAC is clear that an organization will be strictly liable for any such asset diversion, regardless of the steps taken by the grantmaker or any of its service providers. To this point, we note that Rev. Proc. 2017-53 expressly encourages grantmakers to take these additional measures, which are not considered an element of the “preferred written advice” in the ED itself:
“In addition, while not a requirement for preferred written advice, the private foundation should also confirm that the organization or its controlling officers, directors, or trustees are not foreign persons whose property and interests in property are blocked pursuant to an Executive Order or regulations administered by the Office of Foreign Assets Control.”
In addition to adding this list-checking service (which we are in the midst of operationalizing), we will soon be launching a number of new features, including a redesigned ED analysis format and certificate, and a few new pilot programs aimed at keeping our grantmakers better informed and the NGOs in the repository better served. As always, we welcome your feedback, questions, concerns, and any other input you’d like to offer.
We thank the Gordon and Betty Moore Foundation for their generous contribution and support.