The Internal Revenue Service (IRS) ruling known as Revenue Procedure 2017-53 offers a procedure that allows private foundation grants to be made to organizations outside the United States. Foundations follow this procedure in order to determine whether a foreign grantee is equivalent to a United States 501(c)(3) public charity or private foundation under U.S. tax law. Revenue Procedure 2017-53 permits the determination to be based, in part, on an affidavit provided by the foreign organization requesting the grant.
The full or original Affidavit Packet is required to be submitted by all non-U.S. grant applicants with their first application, as well as every 6 years after that point. The Affidavit Update Packet should be used during the time between the original affidavit submission and the 6 year full affidavit submission.
Our Affidavit Chart helps explain why the information in the affidavit form is requested.
To meet the first part of the two-part equivalency test, a grantee must provide sufficient information to demonstrate that it is organized and operated exclusively for charitable, educational or other exempt purposes — that is, the equivalent of a 501(c)(3) exempt organization in the United States. For this reason, the Foundation requires that the grantee confirm in the affidavit that:
- It is operated exclusively for specified charitable purposes.
- Its country’s laws and customs, or its governing documents, do not permit substantial noncharitable activities or lobbying.
- Either its country’s laws and customs, or the organization’s governing documents, prohibit any direct or indirect intervention in a political campaign.
- Its country’s laws and customs, or the organization’s governing documents, do not permit any of its assets or income to benefit a private person.
Revenue Procedure 2017-53 also requires that the grantee provide English-language copies of its charter, articles of incorporation, bylaws and other governing documents. The Foundation requires copies of the grantee’s organizational documents in English and in the native language.
In addition, the grantee must provide a list of its current officers, directors and trustees.
Finally, to ensure that the grantee is organized and operated exclusively for charitable purposes, the affidavit requires the following:
- Affirmation that its assets will be distributed on dissolution to another nonprofit organization for charitable or other exempt purposes or to a governmental entity for a public purpose.
- A copy of the relevant statutory law and provisions in the grantee’s governing instruments controlling the distribution of the organization’s assets on liquidation.
Requiring the grantee to provide this information via the affidavit allows the Foundation to determine that the grantee’s assets will be distributed to another charitable organization for exempt purposes upon dissolution.
The Foundation may be asked on occasion to make a general purposes grant to a foreign grantee that does not have an acceptable dissolution clause in its governing documents and is located in a country in which the law is unclear on this point. In such cases, the Foundation cannot make the grant.
The second part of the equivalency test involves completion of a public support schedule and major donor support schedule that are attached to the affidavit. In those schedules, the organization details the sources of its support over the last five years (or such shorter period that the organization has been in existence). The Mott Foundation uses the schedules to determine whether the organization is equivalent to a public charity or a private foundation in the United States. See the Affidavits FAQs for more details.