New Proposed Regulations: What the “Foreign Grant Reporting Act” Could Mean for Grantors and Grantees

H.R. 8290, introduced on May 8, 2024, aims to amend the Internal Revenue Code of 1986 by requiring public disclosure of grants made by certain tax-exempt organizations to foreign entities. Named the “Foreign Grant Reporting Act,” it mandates that these organizations include detailed information in their annual returns about any grants or assistance provided to foreign entities, and any other beneficiaries that receive either direct or indirect benefit from the grant. If passed, CAF America expects that it would impact our work and our industry substantially.

Current State

As a grantmaking intermediary, CAF America is already very open about listing the grantees that we work with, maintaining a database of pre-vetted organizations around the world who have passed our due diligence protocols and can receive grants funded by our donors. We even issue a ‘seal of approval’ to those organizations that they can embed on their websites and use to promote proof of their good governance (i.e., they have met our standards as a U.S. Foundation, which are typically higher than other countries with a less developed charitable tax benefit policy framework). In that sense, we go above and beyond our current legal requirement on talking about our grantees. However, we do not list each grant we make to them in our publicly available Form 990 and we are not currently required to report the names of foreign subgrantees—entities or individuals outside the U.S. who receive support funded by our grants—which may be required if this new act was passed.

How Things Might Change

The bill requires 501(c)(3) organizations to disclose the name, address, and type of organization for all international grant recipients, similar to current private foundation requirements. This means CAF America will potentially need to list each grantee we facilitate funds to on our 990 (an IRS form that provides the public with information about a nonprofit organization). Additionally, the bill mandates reporting of subgrants, where the initial grant recipient then makes international grants. It also extends this requirement to cover indirect contributions, ensuring full transparency of all grants to foreign entities and their beneficiaries. The act would apply to returns filed for taxable years starting after its enactment (the committees assigned to this bill sent it to the House or Senate as a whole for consideration on May 15, 2024).

With this change in mind, we are tracking some key implications for both U.S. foundations and their foreign grantees:

Potential Grantee Stigmatization

Governments in some countries already scrutinize and control funding to controversial organizations. CAF America, and many funders like us, are used to complying with the regulation of foreign donations when giving to specific countries, such as India, China, and Egypt. But this new requirement may have specific unintended consequences for charities and other partners in countries that enforce “foreign agent” laws. Laws like this are at the center of recent protests in Georgia, and are mirrored in many countries around the world. Listing foreign recipients of grant funding in public filings could bring undue attention to anyone receiving support from U.S. foundations, and put them at risk of further harassment—first and foremost as a result of being listed in a ‘foreign agent’ registry.

Administrative Burden of Sub-Grantee Reporting

In addition to the downstream impact on grantees and their beneficiaries, this new reporting requirement would add significant financial and administrative burden to organizations like CAF America. In particular, the language requires the disclosure of the name and address of “each person to which such grant or other contribution is made directly or indirectly.” As a grantmaking intermediary, we aim as much as possible to reduce the regulatory burden on our grantees. This requirement would lead to an exponential increase in the amount of data we need to collect from our beneficiaries and the people they help. We foresee two main outcomes from this:

  • Charities with limited administrative capacity may no longer be able to meet U.S. foundations’ reporting requirements—already a point of contention in the status quo, especially among grantees in the Global South. Compounded with ongoing, downward pressure on operating costs and overhead, these new requirements may cause international charitable organizations to refuse grants that come with such a high cost to serve.
  • U.S. Foundations may find themselves in the position of collecting personal information on individuals from around the world, and would be responsible for the appropriate management and security of that information. As more and more countries adopt data protection laws, this could also add to the cost of grantmaking on the funders’ side as they are required to store data in specific ways. And, if grants are made to support specific groups of people whose relationships with the grantees are especially protected, it may cause legal problems for all involved if personal information is required to be shared publicly. Consider an unrestricted grant to a foreign hospital—is the U.S. funder expected to report out every patient name, even if that data is restricted in its local context (and would be restricted under HIPAA here in the United States)?

Impact on Equivalency Determination

Finally, this legislation would impact one of the cornerstones of U.S. international philanthropy: equivalency determination (ED). Equivalency determination is a unique, flexible tool in our industry, and it is critical to unlocking the truly impressive amounts of money that flow from U.S. foundations to foreign beneficiaries. Without the unrestricted funding the ED tool enables, less support would reach those charities and their work would be restrained. Under these new rules, grantors utilizing equivalency determination may need to enforce grant agreements for subgrantee reporting, reducing the benefits and flexibility of giving via ED.

CAF America is actively monitoring the status of the proposed Foreign Grant Reporting Act and will provide updates as they become available.

About the Author

  • Brooks Reed, CAP®

    Brooks Reed serves as CAF America's Vice President of Thought Leadership & Philanthropy. He has worked with the CAF Group in a variety of roles since October 2015, when he was a co-author on the report titled Beyond Integrity: Exploring the role of business in preserving the civil society space (Charities Aid Foundation, 2016). After briefly working with CAF UK’s International Team in London, he joined CAF America in 2017 and has led the Department of Business Development since January 2018.

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