International incidents such as the escalating conflict in Ukraine, and related humanitarian concerns, are causing nonprofits to consider their options and limitations with respect to supporting international relief and humanitarian efforts. Nonprofits that do not typically engage in international relief work may nevertheless conclude that expressing solidarity and providing support to overseas communities is consistent with their organization’s mission, values, and priorities in the face of natural and/or geopolitical crises.
The following considerations are critical for U.S. public charities engaging in internationally directed activities:
1. Consistency with Nonprofit Mission: The assets and resources of a 501(c)(3) nonprofit can only be used to advance the organization’s charitable mission, as articulated in its organizing documents (i.e. articles of incorporation and bylaws) and in its Form 1023 application for 501(c)(3) status with the IRS. Nonprofit mission statements are often broad enough to accommodate internationally directed activities, especially when responding to incidents that impact the same communities or constituencies that the nonprofit focuses on domestically. Furthermore, many nonprofits have general “catch-all” language in their governing documents that give them flexibility to pursue charitable or educational activities outside of their specific core mission, at least on an occasional basis. Nonprofit boards should ensure that their governing documents do not explicitly confine them to domestic or regional activities or otherwise limit their ability to engage in internationally directed activities.
2. Scope of Activities & Legal Compliance: Advocacy vs. Grantmaking vs. Direct Programs: Legal ramifications, especially IRS reporting and compliance requirements, may be triggered depending on the scope and nature of the nonprofit’s internationally directed activities. Advocacy, public education, awareness-raising, and campaigns to direct donations to third-party 501(c)(3) charities (without using your nonprofit as an intermediary for donated funds) may not trigger significant reporting or oversight obligations if performed in compliance with 501(c)(3) lobbying and advocacy rules. On the other hand, a decision to launch new humanitarian programs “on the ground” in the relevant overseas territories will trigger significant new reporting and compliance obligations with both U.S. and foreign regulators.
A common middle-ground for nonprofits interested in supporting overseas activities is to provide funds to existing, third-party humanitarian aid organizations. To ensure that this grantmaking activity also advances your nonprofit’s mission, nonprofits should identify recipient organizations that exclusively perform mission-aligned work or donate on the condition that funds are used for specific mission-aligned purposes. Additional considerations may apply depending on if the recipient organization is a U.S.-registered 501(c)(3) organization or a foreign NGO:
• U.S.-Registered 501(c)(3) Grant Recipients: Grants to nonprofit entities that have their own 501(c)(3) status, including both U.S.-based organizations that operate internationally or international organizations that have successfully obtained a 501(c)(3) determination from the IRS, are the most straightforward option for nonprofits interested in transnational giving. Be aware that these grants may need to be reported on your organization’s next Form 990 and may require you to fill out additional Schedules.
• Foreign NGO Grant Recipients: When making grants to foreign NGOs, your nonprofit remains responsible for ensuring that the money is used in a way that complies with IRS rules for domestic nonprofits. Failure to exercise oversight and control over the use of international funds can jeopardize your nonprofit’s 501(c)(3) status at home. Ensure that your nonprofit abides by the following steps when giving to non-U.S. NGOs:
o Perform Due Diligence: Research and vet the recipient organization and only give to organizations with an established track record. To the extent possible, give only to organizations that have the equivalent of 501(c)(3) nonprofit status in their home country and are required to be operated exclusively for charitable or educational purposes.
o Limit the Purpose: Enter into a written agreement that explicitly limits the use of grant funds for specific charitable or educational programs/services that are compatible with your nonprofit’s mission and IRS rules. Grant money should never be used for prohibited activities such as enriching private individuals or funding excessive lobbying and/or political intervention activities.
o Require Reporting & Substantiation: To enforce the limitations surrounding how grant monies can be used, require the recipient organization to prove the money was in fact spent on legitimate programs or services. Oversight options can include periodic grant reports, accounting summaries, requiring invoices or receipts, and/or virtual “site visits” to oversee ongoing programs.
o Anti-Terrorism Compliance: Nonprofits working internationally are prohibited from transacting with sanctioned countries, organizations, and individuals pursuant to requirements established by the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC). Nonprofits should conduct a search of OFAC’s prohibited entities list every time they engage in transnational activities to ensure that the partnership does not involve sanctioned entities or individuals.