If you will operate in, or donate money to organizations located in foreign countries, or make other foreign expenditures of your organization’s funds, you will most likely receive a request for more information, which will slow down your application. In order to forestall this request by giving the information in advance, we hope to eliminate the IRS request for more information.
What the IRS will probably want is a detailed description of all procedures you will follow to ensure compliance with “these restrictions.” The information in quotes below is from the IRS.
“As part of the comprehensive and sustained campaign against terrorist financing, all U.S. persons, including U.S.-based charities, are prohibited from:
A. Engaging in trade or transaction activities that violate the regulations behind OFAC’s country-based sanctions programs without OFAC approval, and ;
B. Engaging in trade or transaction activities with sanctions targets named on OFAC’s list of Specially Designated Nationals and Blocked Persons (SDNs).
OFAC’s guidelines regarding item “A” can be found at: http://www.treas.gov/offices/enforcement/ofac/regulations/ngo_reg.pdf (the Treasury Department has changed their web site, so this link no longer works. Sorry.)
OFAC guidelines regarding item “B” can be found at: http://www.ustreas.gov/offices/enforcement/ofac/index.shtml
For organizations operating in countries that are not actually sanctioned jurisdictions, it is important that the organizations check the OFAC list for names of persons and organizations with whom they are dealing and who many reside in the sanctioned or non-sanctioned countries in which the organization may be operating.
Additional guidance can be found at: http://www.ustreas.gov/offices/enforcement/key-issues/protecting/docs/guidelines_charities.pdf (the Treasury Department has changed their web site, so this link no longer works either.
It will also help (in order to forestall additional IRS questions) if you will also answer the following:
Please explain in detail how your organization will retain control and discretion over use of the funds for section 501(c)(3) purposes. At a minimum, your description should include answers to the following questions:
- What kind of due diligence investigation is done in advance of grant-making?
- What information do you require from potential grantees to verify that grants will be used for exempt purposes?
- What reports or other mechanisms are used to track the use of grant funds?
- If your organization makes or plans to make repeated grants to the same foreign grantee, how often does it perform renewed due diligence on the grantee?
- Will your organization make grants to more than one organization? If so, please explain how and by whom these organizations will be chosen?
- Are or will, grant agreements, reports, and other significant correspondence be written or be accurately translated in English? Specifically, how are grant funds disbursed?
- What steps does your organization take to verify the use of assets for their intended purpose?
- What procedures does your organization have in place if you discover a misuse of funds by a grantee?
- If your organization is set up to provide assistance to a single, specific organization and, for some reason, it becomes necessary to stop providing funds to that organization (for example, if the supported organization dissolves), what will your organization do with your remaining funds:? Please provide a detailed description.”
Occasionally, the following is also required:
“Please provide resumes for your officers. Include their full legal names and any aliases, provide their last three addresses, and the last three employers’ names and addresses.”