What Is an Equivalency Determination?

An equivalency determination is a good faith determination that a non-U.S. organization is the equivalent to a U.S. public charity. Find out more.

How Is Equivalency Determined?

An organization is deemed equivalent to a U.S. public charity if it is organized, operated, and funded like a U.S. public charity. Organizations may be required to meet certain minimum public support requirements, known as the public support test.

Organizations operating exclusively for charitable purposes include:

• Organizations that are publicly supported (these are organizations that received at least one third of their funding from the public or from their exempt activities) and operate exclusively for charitable purposes.
• Religious organizations (like churches and temples), hospitals, medical research organizations, and educational institutions (like universities or schools).

The NGOsource Difference

NGOsource’s unmatched team of attorneys with global expertise of international tax law enables a thorough, accurate, and efficient equivalency determination analysis in compliance with IRS regulations. This highly qualified team eliminates the need for internal equivalency determination (ED) expertise or external legal counsel at a significantly lower cost.

The ED Process

1. Become an NGOsource member and make an ED request using NGOsource’s custom-built Grantmaker Portal.
2. The NGO receives an invitation from the grantmaker and NGOsource with information needed to understand and participate in the ED process (in one of the five languages in which NGOsource currently operates).
3. The NGO completes the NGOsource smart-branching questionnaire, providing any necessary documentation.
4. NGOsource reviews the questionnaire and documents, reaching out for more information if necessary.
5. NGOsource notifies the grantmaker and the NGO of the equivalency determination. The NGO’s information is saved to expedite future ED requests from grantmakers that would like to give to that organization.

What Does It Mean If an Organization Is Unable to Be Certified?

An NGO may not qualify for equivalency due to inherent differences in organizational structures and legal requirements between the U.S. and other countries. Some common reasons an NGO does not qualify are political activity, excessive lobbying, improper dissolution clauses, and failure to meet public charity financial support requirements.

In this case, the grantmaker may then decide to work with NGOsource to support the NGO in meeting the requirements for ED. They might also choose to use a different process called expenditure responsibility (ER). While NGOsource does not currently provide direct support for the ER process, we can refer interested grantmakers to organizations that support this process.

Are you an NGO? Learn how NGOsource works for you.