In my work to promote philanthropy to Asia and in the Asian American community, I have noticed that many people, while hesitating in making new, large gifts or starting new programs, are still giving. International philanthropy has been on the rise the past several years and even during this global economic crisis, we are fielding calls from individuals and their advisors on how they can structure their giving that much more efficiently and strategically. As I speak to these individuals and their advisors, many still do not realize that they can make gifts to support organizations outside of the U.S. and still receive a charitable tax deduction if they structure their giving using intermediaries and “friends of” organizations.
Misconceptions in international giving abound
It was very timely then when an advisor asked me to co-present at the Chicago Global Donors Network’s annual event, Global U – How to Connect Your Charitable Giving to Your Global Interests earlier this month. My workshop, The Benefits and Challenges of Grantmaking Through International Intermediaries focused on the challenges and benefits of working with intermediaries like Give2Asia. The one day event brought 100+ people together to learn about giving abroad or wanting to refine their knowledge of international philanthropy. During the sessions and in side conversations, I was not surprised at all to hear some of the comments such as, “Oh, we were suppose to do that filing?” or “But I thought if they were a registered organization in India, I can just send them a check and get a tax deduction.” Navigating the legal, tax and financial aspects of giving overseas is not an easy task. However, donors and their advisors should not shy away from it as there are many reputable groups and resources that can help them.
Growth of private support overseas
According to The Hudson Institute’s Global Philanthropy Index, U.S. official development aid overseas is $23.5 billion. However, this is small compared to the $71.5 billion of remittances sent overseas and $34.8 billion in private giving. If we looked at private giving – by individuals, families and foundations, here is the breakdown:
• Corporations gave $5.5 billion
• Total international giving by U.S. foundations total $4 billion
• Private and voluntary organizations contributed $12.8 billion
• Universities and colleges provided $3.7 billion in scholarships, grants and other support
• Religious giving totaled $8.8 billion
So how do we continue to nurture and encourage more individuals to support non-U.S. organizations and projects that they care about as part of their overall giving? One strategy is to help individuals and corporations access resources to ensure that their giving is smart and takes advantage of the tax incentives and organizational resources available. The other is to help donors learn more about local, on the ground, organizations and issues so that they may be better investors of their philanthropic dollars.
Benefits and challenges of using intermediary organizations
Intermediaries are one option for making tax deductible gifts to support foreign charities. Some benefits include: (1) access to experts in the international grant making arena and ‘best practice grant making; (2) you have a trusted partner that understands local issues and critical needs; (3) an overall approach can complement your domestic grant making strategy; (4) donors minimize their risk and liability because intermediaries are required to embark on strict due diligence requirements; and (5) intermediaries alleviate the administrative burden of managing IRS requirements.
Some of the challenges were also discussed in our session. The nonprofit landscape differs widely from country to country. This requires country-specific expertise and knowledge to ensure the success of donor’s projects including design, implementation, monitoring and evaluation. Therefore, it is crucial to find a partner that is familiar with the local laws and regulations and also the issues surrounding the program’s needs. Second, international grantmaking, whether using an intermediary or not, costs more because of the due diligence requirements required by the IRS tax code and the simple challenges resulting from distance and language differences. Filings, use of advisors overseas, and translation costs are some of the costs associated with overseas giving. Finally, there are varies forms of intermediaries available and each organization has different niches, expertise, costs and services. Some are country specific while others are region focused. For donors, the key is finding a partner that understands your needs, has the expertise in the area you wish to focus on and finally, is in the cost margin that you are comfortable with.