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Basic Options for International Grantmaking

The Council on Foundations defines “international grantmaking” to include grants made by U.S. foundations and corporations to overseas recipients as well as grants made to U.S.-based organizations operating international programs. This includes grants made toward activities wholly within the Unites States that have significant international purpose and impact.

International grantmaking by U.S. foundations and corporations is growing rapidly as U.S. grantmakers become more aware than ever of the rewards of supporting international activities and connecting with grantee partners around the world. According to International Grantmaking IV: An update on U.S. Foundation Trends, published by The Foundation Center in cooperation with the Council on Foundations, U.S. foundation giving for international purposes reached a record $5.4 billion in 2007, and 2008 giving is likely to top that record.

There are several options available to U.S. foundations and corporations interested in international grantmaking. Here are the basic options:

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U.S. 501(c)(3) Organizations

The simplest option is to make a grant directly to another U.S. 501(c)(3) charitable organization to support its international programs or activities.

“Friends of” Organizations

Another easy option is to make a grant to a U.S.-based 501(c)(3) “friends of” organization that has been set up to raise funds for a specific charitable program or activity outside the U.S., often a university, museum or hospital.

Donor-Advised Funds

Still another relatively straightforward option is to establish a donor-advised fund with a U.S.-based 501(c)(3) public charity that can, for a fee, provide a range of legal and monitoring services to donors wishing to support organizations located outside the U.S. A relatively new but growing option for making international grants is to set up a donor-advised fund with a willing U.S. community foundation, some of which are linking local ethnic communities they serve with their countries of origin.

Direct Cross-Border Grants

Making cross-border grants directly to organizations located in other countries is an option that requires some additional steps due to special IRS rules for private foundations, but the process need not be difficult. Many private foundations choose this option because it enables them to have a one-to-one relationship with their overseas grantee partners.

The following section explains the two approaches embodied in the IRS rules —equivalency determination and expenditure responsibility—that private foundations may choose if they wish to make direct grants to non-U.S. grantees. Public charities often follow these rules as well, as a good practice, although they are not required to do so.



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