Jessie Krafft, Senior Director of Donor Advised and Grant Services Hot Topics in International Grantmaking Regulation, Risk and Reputation Edit June 22, 2017 Presented by: Jessie Krafft, Senior Director of Donor Advised and Grant Services

Welcome/Introduction Jessie Krafft Senior Director of Donor Advised and Grants Services at CAF America Ready to go

25 Years of Service Charities Aid Foundation of America (CAF America) is a global grantmaking organization assisting corporations, foundations and individuals. For 25 years, we have been streamlining the grantmaking process to eliminate risk and administrative burden for our clients. Through our work, we help donors support great causes by assisting them in making strategic, cost-effective and tax-advantaged grants both internationally and domestically.

Worldwide Collaboration CAF Global Alliance Worldwide Collaboration CAF LOCATIONS: • United States • Canada • Brazil • United Kingdom • Bulgaria • Russia • South Africa • India • Australia Advisor Networks • Asia Pacific • Africa

We Understand Domestic and International Grantmaking * *reflects giving for last five years through 7/15/15

Hot Topics REGULATION, RISK & REPUTATION Topics to be addressed: Challenges & regulations for international giving IRS and Federal Regulatory Compliance Expenditure Responsibility or Equivalency Determination? Considerations. Best ways to mitigate risks in international giving Considerations of local laws If desired, encourage attendees to ask questions during the presentation vs. holding them until the end

Challenges Conducting International Giving 12/4/2013 Challenges Conducting International Giving Most countries do not have “IRS-like” databases of approved charitable organizations Level of organizational vetting & compliance is more complex and costly than when issuing grants in the United States The barriers to ensuring that reputation will be protected is much higher Please update slide It is imperative to understand United States law as it pertains to international giving as well as the rules and regulations of the countries where the grantmaking/program support will occur

3 Ways of Supporting International Causes 12/4/2013 3 Ways of Supporting International Causes • Make gift directly to foreign organization (from the United States) • Make donation through a 501c3 organization or an intermediary grantmaker (also 501c3) • Utilize “in-country” funds to issue grants Briefly note pros and cons of each.

Requirements for Direct International Grants What protocols have the IRS approved to allow giving internationally? Equivalency Determination (ED) Expenditure Responsibility (ER) Note difference between corporation and corporate foundation. For corporations: Direct international grants are not deductible as charitable contributions. Could work with corporate foundation or 501c3, intermediary. Dicuss how CAFA utilizes both. Recommends both options for flexibility based on grantee and grant types. Corporate Foundations: need to follow these guidelines (or work with an intermediary, 501c3 entity)

Equivalency Determination (ED) 12/4/2013 Equivalency Determination (ED) Equivalency determination is the method by which a private foundation collects detailed information on a foreign charitable organization in order to determine whether or not it is the equivalent of a United States public charity described in Code section 501(c)(3). Please update slide *Please note that there are new regulations issued by the IRS in 2015

Equivalency Determination (ED) 12/4/2013 Equivalency Determination (ED) Focused on Grantee as a Whole: Grant maker must make reasonable judgment/ good faith determination that grantee meets U.S. standards Amendments to 26 CFR part 53 under chapter 42, subtitle D of the Internal Revenue Code (Code). To avoid certain excise taxes under chapter 42. www.cafamerica.org/latest-from-the-irs-new-standards-for-equivalency-determination/ New Guidance: Qualified Tax Practitioners can provide opinions to third parties and affidavits are no longer considered sufficient to establish equivalency Affidavit must be substantiated.

ED is NOT a license to give Equivalency Determination (ED) ED is NOT a license to give

Additional Due Diligence Requirements 12/4/2013 Additional Due Diligence Requirements International grantmakers need to follow U.S. laws and provide for additional compliance checks, such as: • USA PATRIOT Act • Executive Order 13224 • HR4 (the Pension Protection Act), • U.S. Treasury Department Voluntary Guidelines for International Grantmaking • Foreign Corrupt Practices Act   Discuss general AML and Anti-terror and Anti-bribery principles and how CAFA integrates these compliance checks into our reviews. This is for ED and ER, but it is notable here as some believe that an ED certificate is all that is needed.

Expenditure Responsibility (ER) 12/4/2013 Expenditure Responsibility (ER) IRS Requirements and Penalty Pre-grant inquiry: “reasonable assurance” that the expenditure is charitable Grant agreement restricts use of funds to specific charitable projects (and other requirements) Financial & narrative reports at least annually & final cumulative report 990 Reporting 20% tax on amount of the grant if you get it wrong Provide basic outline of our “pre-grant inquiry.” Application and list of documents.

Restrictions When Giving 12/4/2013 Restrictions When Giving Internationally What are the restrictions of giving internationally? • No political activity • No substantial private benefit or commercial purpose • Care must be taken not to direct support to individual employees • Only used for “exempt” purposes

Grantee Considerations: 12/4/2013 Grantee Considerations: ED or ER? • Capital Assets • Endowment • Re-granting • Funds returning to the United States • Unrestricted (general support) grants • Grantee cannot pass ED (does not mean they’re a bad grantee partner!) • Foreign Government Entities Hippo Water Rollers! Public support, Political activity, etc.

Restrictions When Giving 12/4/2013 Restrictions When Giving Internationally (via an intermediary) No “earmarking”: No agreement, oral or otherwise, that funds must go to predetermined recipient or to recipient of donor’s choice. Must clearly inform donor that donor advised fund has ultimate discretion/control over funds – donor does not! IRS looks to reality, not just form: • Do we inevitably follow donor’s advice? • Do we provide our own expertise? • Are we serious about making sure grants further our charitable purposes?

Best Ways to Mitigate Risks when Granting Globally 12/4/2013 Best Ways to Mitigate Risks when Granting Globally KEY POINTS TO CONSIDER: Utilizing a Donor Advised Fund is typically more cost effective than creating foundations in local countries where your company conducts business, thus enabling you to allocate more funds/resources towards programs (and ultimately desired outcomes) Establishing a donor advised fund through an intermediary organization enables companies to dramatically mitigate their risk, while protecting its reputation and adhering to all government laws and legislation  

It’s not only about US Laws 12/4/2013 It’s not only about US Laws • Local, in-country laws must also be considered. Is the grantee legally able to accept foreign funds? • Data privacy considerations • Local regulations on AML, Anti-terrorism • “Foreign Agent” concerns. Does the organization want to accept foreign funding? Must be sensitive to local contexts to ensure that you don’t get your grantees in trouble. We cannot assume that they know their local laws either, so a huge part of our role as a global intermediary is to keep on top of changing local regulations (we’re busy!!)

Laws Affecting International Giving 12/4/2013 Laws Affecting International Giving Recently enacted and proposed (or well-established) laws affect the ways in which companies conduct their international grantmaking in such countries and international bodies such as: • India • Mexico • China • Russia • E.U. Safe Harbor  

Partners of the SDG Philanthropy Platform include: CAF America & the SDGs Partners of the SDG Philanthropy Platform include: CAF America has been involved and engaged with the SDGs for over 3 years now. CAFA is the first organization in the intermediary space that joined the SDG Philanthropy Platform along with the founders listed here. IGS 2015 – we had a panel discussion addressing the importance of the planned SDG framework for international philanthropy and grantmaking IGS 2016 – the entire Symposium aimed to address questions pertaining to international philanthropy / international grantmaking within the context of the SDGs. We have partnered with UNDP. Just to give a little context on the plaftorm: The SDG Philanthropy Forum is a collaborative platform that helps engage funders with the SDGs. They track SDG funding data and provide free tools to help your company understand how your work already aligns with the SDGs.

12/4/2013 QUESTIONS?

Senior Director of Donor Advised and Grants Services, CAF America 12/4/2013 Thank You! Jessie Krafft Senior Director of Donor Advised and Grants Services, CAF America jessie@cafamerica.org www.cafamerica.org CAF America – HQ 225 Reinekers Lane, Suite 375 Alexandria, VA 22314 202.793.2232 CAF UK 12 St. Bride Street London EC4A A4D +44 3000 123 000 CAF America – West Coast Office 50 California Street, Suite 1500 San Francisco, CA 94111 415.439.5347