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International charitable giving by Americans has increased dramatically in recent years, and is evolving as a tax planning area of significant importance. Contributions by individuals and private foundations to, or for the benefit of foreign charities, are subject to complex tax rules, often presenting formidable obstacles in making such contributions. This is particularly the case for individual taxpayers given that a contribution by an individual to a foreign charity is not deductible, thereby making a private foundation an excellent vehicle for foreign grantmaking. In recently issued Rev. Proc. 2017-53, which international grantmakers, and their advisors, have eagerly anticipated, the IRS has lightened the burden associated with foreign grantmaking by U.S. private foundations by providing simplified procedures regarding written advice upon which they may rely in making distributions to foreign charities.

Background on Private Foundation Grantmaking Rules

Each year, a private foundation must make distributions for charitable purposes equal to at least 5 percent of the fair market value of its assets. A private foundation may make grants to an organization that the IRS has determined to be tax-exempt under Internal Revenue Code Section (Section) 501(c)(3) and a public charity under Section 509(a). As a general rule, a foreign charity will not obtain such a determination. Even in the absence of a foreign charity obtaining an IRS determination as to its tax-exempt status, a private foundation is still permitted to make a grant to a foreign charity where it (i) makes a good faith determination that the foreign charity is the equivalent of a Section 501(c)(3) public charity (i.e., an equivalency determination); or (ii) exercises what is known as “expenditure responsibility” with respect to the grant, generally requiring, among other things, a grant agreement, reporting by the foreign charity, and the grant funds to be held in a separate fund pending their use by the foreign charity.

To make an equivalency determination, and thereby avoid the expenditure responsibility requirements, a private foundation previously was able to rely on an affidavit from the foreign charity evidencing that the organization was the equivalent of a Section 501(c)(3) public charity. The ability of a private foundation to rely upon on such an affidavit was eliminated as a result of regulations previously issued in 2015. The 2015 regulations do provide a general rule that a private foundation may treat a foreign grantee as a qualifying public charity if it has made a good faith determination to that effect. Those regulations also include a special rule that a private foundation's determination ordinarily will be considered to be made in good faith if it is based on written advice that is “current” and received from a “qualified tax practitioner” concluding that the grantee is a “qualifying public charity.” The IRS indicated in the 2015 regulations that it intended to publish a Revenue Procedure providing additional details and examples on properly making the equivalency determination in reliance on written advice, which it has now done in the form of recently issued Rev. Proc. 2017-53.

Rev. Proc. 2017-53

Rev. Proc. 2017-53 provides guidelines in connection with the written advice upon which a private foundation may rely in connection with making a determination that a prospective foreign grantee is the equivalent of a Section 501(c)(3) public charity, a listing of some of the more important points is set forth below:

  1. The written advice and all attachments, including the foreign organization’s governing documents, should be written in or translated into English.
  2. Supporting affidavits from the foreign organization may be attached to the written advice, provided they are attested to by an officer or trustee of the organization with personal knowledge of the facts.
  3. The private foundation and practitioner may rely on translations and public information regarding foreign laws governing the foreign organization. 
  4. The written advice should identify the tax-exempt purpose or purposes under Section 501(c)(3) for which the foreign organization is organized and confirm that the organization is not expressly permitted to engage in activities for non-charitable purposes other than as an insubstantial part of its activities.
  5. Confirm that if the foreign organization terminates, liquidates, or dissolves, then under the governing instrument or applicable law, all of the organization’s assets will be distributed to another not-for-profit charitable organization for charitable purposes or to a governmental entity for a public purpose.
  6. Confirm that (i) the foreign organization has no shareholders or members who have an ownership interest in the income or assets of the organization, (ii) the organization does not distribute any of its income or assets to a non-charitable organization or individual, or apply any of the its income or assets for the benefit of a non-charitable organization or individual (and its governing instruments do not expressly permit such activities), except pursuant to the conduct of its charitable activities, or as payment of reasonable compensation for services rendered or payment of the fair market value of property that the organization has purchased.
  7. Confirm that (i) the foreign organization does not attempt to influence legislation (except as an insubstantial part of its activities), (ii) the organization does not directly or indirectly participate or intervene in any political campaign on behalf of, or in opposition to, any candidate for public office and (iii) the organization’s governing instruments do not expressly permit such activities.
  8. Describe the past, current and anticipated (over the term of the grant) activities of the foreign organization, including details such as the manner of carrying out the activities, sources of receipts and types of expenditures sufficient to enable the IRS to determine that the organization would likely qualify as a qualifying public charity as of the date of the written advice.
  9. Verify that the charitable organization has not been designated or individually identified as a terrorist organization by the U.S. Government.

Rev. Proc. 2017-53 also clarifies the financial information that should be attached to the written advice in support of the equivalency determination, which depends on the type of organization and how long the organization has been in existence.


With the issuance of the new guidelines in Rev. Proc. 2017-53, the IRS has simplified the “safe harbor” of obtaining written advice from a qualified tax practitioner so that a private foundation may make grants to foreign charities without having to exercise expenditure responsibility. U.S. private foundations making grants to foreign charities and their advisors should familiarize themselves with the helpful roadmap, now provided by the IRS, to safely navigate the perilous, but rewarding, journey of carrying out their charitable mission overseas through grantmaking activities.