Grantmaking Fundamentals
This four-part blog series teaches about equivalency determination (ED) and expenditure responsibility (ER)–two essential concepts in grantmaking. Discover why these terms matter and how they differ in practice. The first two blogs break down ED and ER individually, while the third offers a compelling comparison of their strengths and weaknesses. The final blog unpacks the public support test, a critical aspect of ED.
As part of our Grantmaking Fundamentals series, these blogs are packed with vital insights and resources to empower donors like you to make informed decisions and maximize your philanthropic impact.
What Is Expenditure Responsibility?
Expenditure Responsibility (ER) is a tool provided by the IRS for foundations that allows for targeted funding that supports a specific charitable project when giving, lending, or otherwise supporting an entity that is not designated as exempt under U.S. IRC Section 501(c)(3).
What Is Equivalency Determination?
Equivalency determination (ED) is the process by which a U.S. grantmaker makes a good faith determination that a foreign grantee is considered the equivalent of a U.S. public charity under IRS Sections 501(c)(3) and 509(a) of the tax code.
Passing the Public Support Test: Challenges of Equivalency Determination
One of the requirements of an Equivalency Determination is that the entity is “supported by the general public.” In real terms, the IRS uses what is called the “public support test” to evaluate the level of funding coming from multiple donors.
Equivalency Determination vs. Expenditure Responsibility: Which Is Right for You?
A private foundation may choose to use either equivalency determination or expenditure responsibility. Both tools are equally valid options for making a grant to a non-exempt entity.