International Philanthropy

Helping Ukrainians – Practical U.S. Federal Tax Compliance Considerations for Foreign Grantmaking

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Many nonprofits and churches are quickly pivoting from their regular charitable and religious activities to assist with the humanitarian crisis caused by the Russian invasion of Ukraine. If this type of giving falls outside of the organization’s normal activity, it is important to maintain legal compliance with U.S. federal tax law and Department of the Treasury sanctions governing international grantmaking activities for public charities and private foundations.

We are pleased to share an extremely pertinent article by Mike Batts, CPA, of BMWL, Batts Morrison Wales & Lee Certified Public Accountants, with their permission.

Nonprofit Holiday Highlights

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The year 2021 is quickly winding up, and 2022 is just across the horizon! Our law firm’s attorneys and paralegals deeply value the honor and opportunity to assist so many amazing nonprofit organizations and their incredible leaders, and to help advance their compelling and worthwhile missions. Thank you for this opportunity to serve as trusted legal advisors providing client-focused solutions, creative approaches to advance clients’ interests, and vibrant community engagement to help the nonprofit sector flourish. As a parting gift for this year, we’d like to share some holiday cheer – and what better way than through providing links to some key W&O blog articles across our nonprofit practice groups? We hope the W&O blog will continue to be a valuable resource for you!

Giving Globally Part 2: Expenditure Responsibility

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Imagine a newly formed nonprofit is organized to help end poverty internationally. The foundation’s board aims to accomplish its charitable purpose in many different ways, including funding local organizations in foreign countries. The grant-related tax concept of “expenditure responsibility” is vital if the new organization is a private nonoperating foundation, and it is also quite helpful for other Section 501(c)(3) organizations.

Giving Globally: Equivalency Determinations

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International philanthropy is heartily encouraged under US tax laws, which generously allow section 501(c)(3) nonprofits to financially support other organizations and projects operating entirely outside the United States. But foreign grantmaking rules for 501(c)(3) organizations differ depending on whether an organization is a public charity, a private foundation, or a sponsoring organization for donor advised funds (DAFs). Nonprofit leaders should therefore understand not only what rules apply, but also available compliance options.

OFAC Releases New Guidance on International Sanctions Compliance

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Many U.S. nonprofits provide vitally needed humanitarian assistance internationally, particularly against the backdrop of pressing medical needs, refugee crises in war-affected countries, and extensive poverty.  In connection with any foreign grantmaking, foreign payments, or other overseas operations, nonprofits need to be mindful of their obligations to comply with United States sanctions programs, which are often more extensive and applicable than many nonprofit organizations understand.

Totalization Agreements: International Social Security Tax Compliance

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Looking ahead to retirement, an employee who meets one country’s basic social security eligibility requirements may receive benefits from that country. For example, a U.S. citizen will become qualified for U.S. social security benefits after earning forty credits (10 years total of work). If an employee or self-employed individual works long enough to meet the basic social security requirements of the U.S. and a foreign country, the employee may receive benefits from both countries, although benefits earned may be correspondingly reduced to prevent a windfall. What happens, however, when an employee or self-employed individual does not meet the basic social security requirements of any country because his or her time has been divided between working in the U.S. and working abroad? 

Anti-terrorism Efforts in the Nonprofit Sector

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Many U.S.-based nonprofit organizations have an international component to their operations. If your nonprofit organization provides charitable resources to organizations and individuals overseas, whether in the form of goods, cash grants, or services, it is crucial that you perform and memorialize certain due diligence procedures concerning where and to whom you are sending such resources. The U.S. imposes significant civil and criminal penalties on any person, including nonprofit organizations, who finances or otherwise supports terrorism.

Charitable Donations From Afar: Are They Tax Deductible?

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How should a Section 501(c)(3) organization handle donations received from donors outside the United States? With a thank-you note, of course! And then what? A U.S. public charity should issue a charitable contribution receipt, but refrain from stating that such a donation is tax deductible to the donor. Here’s why, and how the gift’s tax deductibility may vary depending on the donor’s own tax status and situation.

Overview and General Rule

China’s New Nonprofit Law and the Growing Trend Impacting International Philanthropy

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Chinese legislators just passed disturbing legislation granting police broad authority to supervise foreign nonprofits.  The Chinese law requires all foreign nonprofits to register with the Ministry of Public Security and authorizes the police to search nonprofits’ offices and summon their representatives at will.  China has joined Russia and India in citing national security concerns as ostensible grounds for adopting increasingly hostile laws to US and other foreign nonprofits operating in their countries.

Since the 9/11 terrorist attacks, US mission organizations, disaster-relief groups, and other humanitarian nonprofits have needed to implement numerous safeguards to ensure charitable assets do not fall into the hands of, or incidentally support, terrorists.  Such anti-terrorism measures are amply warranted.  But the changing legal and political landscapes in Russia, India, and China present entirely different challenges for nonprofits engaging in humanitarian or mission work in these countries.  The new regulations in these three countries are forcing US nonprofits to develop new and creative legal solutions to protect the ongoing humanitarian and mission work in these countries.

For example, following President Putin’s re-election in 2012, Russia adopted what is commonly known as the “Foreign Agent Law” which requires nonprofits that receive foreign donations and engage in "political activity" (a broadly defined term) to register and declare themselves as “foreign agents.”  Once registered, the nonprofits are required to disclose their status as “foreign agents” on all official fundraising and other communications and are subject to a number of other hostile provisions.  In 2015, Russia enacted an additional law which bars any nonprofit that the Russian Government determines is “undesirable” as a threat to the constitutional order and defense capability, or the security of the Russian state.  NGOs that do not cease all operations are subject to substantial fines and jail time.

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