Grantmaker members and NGOs may wonder why the name of an NGO on its Equivalency Determination (ED) Certificate often differs from the name that was initially submitted for review. The reason is that an ED is a legal opinion, which must reflect the exact legal name of the entity as evidenced on its legal formation or registration documents.
As discussed in previous posts, the Internal Revenue Service (IRS) requires that a public charity in the U.S. be organized and operated exclusively for charitable purposes. It may not be organized or operated for the benefit of private interests (private benefit), and no part of its net earnings may benefit private parties (private inurement).
As described elsewhere on our site, an equivalency determination (ED) is a written opinion, by a qualified U.S. tax practitioner, that a non-U.S. organization is equivalent to a U.S. public charity. The ED does not make a judgment on the value of the work conducted by the non-U.S. organization or the efficacy of its programs. It is simply an opinion that the organization's purposes and activities align with those required to be recognized as a tax-exempt charity in the U.S.
As we embark on the start of a new year, many of us at NGOsource are reflecting on the significance of the past year and looking optimistically toward the new year. We're also thinking about how a new year will impact the Equivalency Determination (ED) validity period. The ED validity period, dictated by U.S. tax law, indicates when a private foundation or donor advised fund (a “grantmaker”) can rely on the written advice provided in the ED.
In earlier posts, we've restated the definition of "charitable" under the U.S. Treasury Regulations, noting that charities in the U.S. must be organized and operated exclusively for charitable purposes. Understanding the breadth and nuance of the term “charitable,” as defined under U.S. law, is important for organizations seeking an equivalency determination (ED) through NGOsource.
As further elaborated on NGOsource's website, 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. As part of the ED process, a qualified tax practitioner collects and analyzes detailed information about a non-U.S. organization's finances, structure, and operations.
What Is Dissolution?
Dissolution is the termination or closing of an organization in its present state. There are various reasons an organization would need or want to dissolve. For example, the organization might have fulfilled its mission or lack sufficient resources to effectively carry out its work. Perhaps there is no longer a need for the organization’s services, or it is dissolving as a result of a merger.
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