International Giving

Why International Giving Is Different

Philanthropy that crosses a national border introduces a distinct set of legal, logistical, and reputational considerations that do not exist in domestic grantmaking. U.S. tax law treats foreign organizations differently from domestic ones, and private foundations — the most common giving vehicle for substantial families — bear the heaviest compliance obligations. Understanding the framework before committing to international work saves time, cost, and potential legal exposure.

The core issue is straightforward: a U.S. private foundation receives favorable tax treatment in exchange for operating within a set of rules designed to ensure that funds serve genuine charitable purposes. When money leaves the country, the IRS has less visibility into where it goes and how it is used, so the rules require the foundation to create that visibility itself.

The Two Paths for Direct Foreign Grants

When a private foundation wishes to grant directly to a foreign organization, two distinct approaches may be evaluated.

Equivalency Determination

An equivalency determination is a legal analysis — typically prepared by qualified counsel or a specialist service — concluding that the foreign grantee organization is the functional equivalent of a U.S. public charity. The foundation reviews the grantee's governing documents, financial records, and organizational structure to confirm it meets the relevant standard. If a good-faith, reasoned determination is made and documented, the grant is treated as if it were made to a domestic public charity, which simplifies ongoing oversight.

The analysis requires real legal expertise. Documents may need translation, governance structures vary widely by country, and the determination must be refreshed periodically. A qualified attorney must evaluate whether any particular situation meets the applicable standard — this is not a do-it-yourself exercise. Families who engage in thoughtful, recurring grantmaking in a specific region often find that investing in these determinations upfront reduces friction over time.

Expenditure Responsibility

Expenditure responsibility is the alternative when an equivalency determination is not pursued or cannot be made. Under this approach, the foundation agrees — in a written grant agreement — to take active responsibility for ensuring the funds are used only for the stated charitable purpose. Requirements typically include a pre-grant inquiry into the grantee, a written agreement specifying how funds may be used, separation of grant funds from the grantee's general operating accounts, written reports from the grantee on how money was spent, and reporting by the foundation to the IRS on its own annual return.

Expenditure responsibility is workable but administratively demanding. Smaller foundations without dedicated staff often find it difficult to sustain across multiple grants or geographies. A well-governed foundation with professional administrators is better positioned to carry these obligations consistently.

Intermediary Structures: The Practical Alternative

Many families and foundations use intermediary organizations rather than making direct foreign grants. These structures can reduce compliance burden, pool due diligence resources, and sometimes extend philanthropic reach into regions where direct relationships are hard to establish.

Friends-Of Organizations

A "friends-of" organization is a U.S.-based public charity created specifically to receive donations and channel them to a particular foreign institution — a museum, hospital, university, or relief organization, for example. Because the friends-of entity is a U.S. public charity, a family or foundation can make a domestic grant to it without conducting an equivalency determination or exercising expenditure responsibility. The friends-of organization handles the cross-border transfer and any local compliance.

The arrangement works well when the foreign institution is prominent enough to have established a recognized U.S. affiliate. The tradeoff is that the donor cedes direct control: the friends-of board has its own fiduciary duties and may not be obligated to follow donor instructions in all circumstances. Reviewing the organization's track record, governance, and financial transparency is an important step before committing significant funds.

Donor Collaboratives and Intermediary Foundations

Several U.S.-based public charities specialize in international grantmaking across specific regions or issue areas. These organizations perform equivalency determinations and due diligence at scale, allowing individual donors and foundations to participate in international work without replicating that infrastructure themselves. A family might contribute to such a collaborative and recommend grants be directed to vetted local partners.

Donor-advised funds offered by major sponsoring organizations can also facilitate international giving, though each sponsor sets its own policies, international eligibility criteria, and due diligence procedures. Families should confirm a sponsor's international capabilities before assuming a DAF solves all cross-border complexity.

Sanctions and Watchlist Compliance

Entirely separate from tax law, U.S. sanctions rules prohibit transactions — including charitable grants — with individuals, organizations, and jurisdictions appearing on government watchlists. Sanctions compliance applies to all giving vehicles, not only private foundations, and is enforced by the U.S. Treasury's Office of Foreign Assets Control (OFAC).

In practice, this means screening the grantee organization, its leadership, and in some cases its affiliated entities against published lists before any funds are transferred. The screening should be documented. Operating in conflict-affected regions or countries subject to broad sanctions programs requires particular care and, in most cases, specialized legal counsel. Families engaged in humanitarian or development work in complex geographies should discuss this dimension explicitly with counsel as part of their international wealth and legal planning.

Inadvertent violations can carry serious consequences. This is an area where professional compliance review is not optional.

Practical Patterns Families Use

Families who give internationally with some regularity tend to adopt one of several patterns.

• Concentrating in one or two geographies. Deep regional focus allows a foundation to invest in equivalency determinations and local relationships that pay dividends across multiple grants and years. Spreading thin across many countries multiplies compliance work without proportionate impact.
• Using a fiscal sponsor or intermediary for early exploration. Before committing to a long-term international program, some families route initial grants through an established intermediary to test the field, evaluate local partners, and build relationships without immediate infrastructure investment.
• Building formal grant agreements for all direct foreign grants. Even when not legally required, a detailed written agreement stating the charitable purpose, reporting expectations, and conditions for return of funds is considered sound practice by experienced international grantmakers.
• Retaining legal counsel with international nonprofit expertise. International philanthropy sits at the intersection of U.S. tax law, foreign law, and sanctions regulation. Generalist estate or tax counsel may not have the specific expertise this area requires.

Families earlier in building their philanthropic infrastructure may find it useful to read about the full range of giving vehicles and how private foundations work before deciding how to structure international ambitions.

Questions Worth Asking Before Giving Internationally

• Does the prospective grantee have a U.S.-based friends-of organization or fiscal sponsor already in place?
• Has qualified legal counsel reviewed whether an equivalency determination is achievable for this grantee, and at what cost?
• Does our foundation have the administrative capacity to maintain expenditure responsibility over multiple years if that path is chosen?
• Has the grantee, its principals, and any affiliated entities been screened against applicable sanctions lists?
• Does our grant agreement clearly specify how funds may be used, how reporting will work, and what happens if the grantee cannot complete the stated purpose?
• Are there legal or operational restrictions in the recipient country on receiving funds from foreign sources?

Some countries impose restrictions on inbound charitable funds, require local registration of foreign grants, or have currency controls that complicate transfers. Local legal counsel in the recipient country — not only U.S. counsel — is often necessary to navigate these rules.