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

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

3. 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.

4. 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

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

6. 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

7. Challenges Conducting International Giving
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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

8. 3 Ways of Supporting International Causes
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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.

9. 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)

10. Equivalency Determination (ED)
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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

11. Equivalency Determination (ED)
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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
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.

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

13. Additional Due Diligence Requirements
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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.

14. Expenditure Responsibility (ER)
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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.

15. Restrictions When Giving
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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

16. Grantee Considerations:
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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.

17. Restrictions When Giving
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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?

18. Best Ways to Mitigate Risks when Granting Globally
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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

19. It’s not only about US Laws
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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!!)

20. Laws Affecting International Giving
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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

21. 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.

22. 12/4/2013
QUESTIONS?

23. 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
CAF America – HQ
225 Reinekers Lane, Suite 375
Alexandria, VA 22314
CAF UK
12 St. Bride Street
London EC4A A4D
CAF America – West Coast Office
50 California Street, Suite 1500
San Francisco, CA 94111