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International Grantmaking by US Foundations

The principal type of grantmaking charity in the United States is the private foundation. When these foundations make international grants, they must comply with certain rules under the IRS tax code or face a penalty. In 1972, the Treasury Department issued regulations that set out and explain the key elements of expenditure responsibility: a complete but “limited” pre-grant inquiry; written grant agreements that clearly spell out the terms of the grant; regular reporting and filing with the IRS, including information on expenditure responsibility for international grants; and record keeping. Penalties are in the form of a series of escalating excise taxes, the severity depending on the nature of the offense. These two measures together, according to an IRS report, have proved to be effective in ensuring that international grantmaking accomplishes its stated charity goals.

This article reviews the origins and the current nature of rules governing international grantmaking by private foundations, the principal type of grantmaking charity in the United States.

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