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How to Be a Global Nonprofit: Legal and Practical Guidance for International Activities

How to Be a Global Nonprofit: Legal and Practical Guidance for International Activities

Lisa Norton

ISBN: 978-1-118-45222-6

Feb 2013

296 pages

In Stock



Solid guidance for the complex legal issues faced by international nonprofits

When a nonprofit operates across borders, whether by making grants or directly operating programs, the interaction among legal requirements of two or more countries quickly becomes highly complex. How To Be A Global Nonprofit fills a need for legal and practical guidance for nonprofit organizations with international activities, and includes ten case studies to provide insights into the ways real organizations have dealt with various legal and practical issues.

Along the way, it skillfully explores alternatives for advancing a nonprofit's mission across borders, while also looking at the legal and practical issues nonprofits encounter as they work internationally.

  • Includes ten case studies based on interviews with large and small international nonprofits
  • Offers a realistic sense of the complexity of legal and practical issues global nonprofits face
  • Features a companion website with a variety of online tools and materials related to key concepts discussed in this book

Not long ago international philanthropy was the province of large organizations like the Red Cross, UNICEF, and Save the Children. This has radically changed. How to Be a Global Nonprofit thoroughly explores the legal and practical issues nonprofits encounter as they work internationally and the resources required to deal with them.

List of Case Studies xiii

Preface xv

How to Use This Book xviii

Disclaimer xix

Internal Revenue Service Circular 230 Disclosure xx

Acknowledgments xxiii

CHAPTER 1 So You Want to Be a Global Nonprofit? 1

1.1 What Do You Really Want to Accomplish? 1

1.2 Spectrum of International Activities 2

1.3 Overview of International Grantmaking 3

1.4 Directly Operating Foreign Programs 12

1.5 Global Fundraising 17

1.6 Legal Considerations: A Basic Framework 17

1.7 The Importance of Vigilance 25

1.8 So, You Still Want to Be a Global Nonprofit? 27

CHAPTER 2 International Grantmaking by Public Charities 29

2.1 Public Charity or Private Foundation: Why Does It Matter? 30

2.2 What Is a Public Charity? 30

2.3 Basic Rules for Foreign Grantmaking 32

2.4 American Friends of Organizations 39

2.5 Special Rules for Donor-Advised Funds 39

2.6 Other U.S. Intermediaries 40

2.7 Review and Further Considerations 40

CHAPTER 3 International Grantmaking by Private Foundations 43

3.1 What Is a Private Foundation? 43

3.2 Should a Private Foundation Make Cross-Border Grants? 45

3.3 Permitted Grants and Disbursements 45

3.4 International Grantmaking: Special Requirements for Private Foundations 48

3.5 U.S. Withholding Tax on Disbursements of Grant Funds 52

3.6 Review and Further Considerations 52

CHAPTER 4 Going Deeper: Operating a Foreign Program 55

4.1 Are You Determined to Move Beyond Grantmaking? 55

4.2 Is Anybody Else Doing It? 56

4.3 Are You Sure You Will Be Allowed to Do What You Want to Do? 58

4.4 Alternative Models for Operating a Foreign Program 59

4.5 Establishing a Foreign Office 60

4.6 Do You Need to Do It Alone? 66

4.7 Staffing a Foreign Office: Consequences to the Organization 69

4.8 Will Your U.S. Organization Be Taxed by a Foreign Country? 70

4.9 What Happens If Your Organization Conducts Business Activities in a Foreign Country? 76

4.10 Foreign Reporting Requirements 79

4.11 U.S. Reporting Requirements 79

4.12 Review and Further Considerations 79

CHAPTER 5 Forming and Operating through a Foreign Legal Entity 85

5.1 Establishing a Foreign Legal Entity 85

5.2 How Hard Will It Be to Form a Foreign Legal Entity? 93

5.3 What Kind of Legal Entity Should You Create, and Why Should You Care? 94

5.4 Do You Want a Model of Control or Collaboration, or Both? 102

5.5 Control 103

5.6 Collaboration 107

5.7 Two Case Studies: One Very Large and One Very Small Organization 108

5.8 Headquarters Offices: Centralized versus Decentralized Services 112

5.9 Shared Employees 120

5.10 Will a Foreign Legal Entity Be Tax-Exempt in Its Local Country? 121

5.11 Will a Foreign Legal Entity Be Taxed in the United States? 123

5.12 The Importance of Keeping U.S. and Foreign Activities Separate 125

5.13 Consider the Burdens of Maintaining Two or More Separate Legal Entities 126

5.14 For-Profit Subsidiaries 127

5.15 Soliciting Funds from U.S. Donors 127

5.16 Review and Further Considerations 128

CHAPTER 6 Staffing Foreign Operations: Employees and Volunteers 133

6.1 Staffing Foreign Operations: Will You Send U.S. Staff or Hire Locally? 133

6.2 Sending People Overseas: Initial Considerations 134

6.3 If You Send U.S. Employees to Work in a Foreign Country, Will They Be Taxed There? 135

6.4 If Your Employees Are Taxed in a Foreign Country, Will They Still Be Taxed in the United States? 137

6.5 Making Payments to People Working in Foreign Countries 141

6.6 Hiring Locally 142

6.7 Hiring or Sending Non-U.S. Citizens/Residents to Work in the United States 143

6.8 Special Considerations for Volunteers 146

6.9 Review and Further Considerations 148

CHAPTER 7 Raising Funds Globally 153

7.1 Why Do You Want to Raise Funds in a Foreign Country? 153

7.2 Will You Be Permitted to Solicit Contributions in a Foreign Country? 154

7.3 Does the Foreign Country Provide Tax Benefits, and Are They Important to Your Donors? 155

7.4 Is a Separate Legal Entity Required? 156

7.5 Tax Benefits for Cross-Border Philanthropy 158

7.6 Exceptions to the Separate Legal Entity Requirement for Fundraising in Foreign Countries 162

7.7 Structuring Relationships among Fundraising and Operating Entities 166

7.8 Keep It as Simple as Possible 167

7.9 Review and Further Considerations 168

CHAPTER 8 Additional U.S. Laws and Reporting Requirements 173

8.1 Anti-Terrorism Compliance 173

8.2 Export Controls 181

8.3 Anti-Boycott Rules 182

8.4 Anti-Bribery Rules 184

8.5 Lobbying and Political Activity 188

8.6 Foreign Funding of Lobbying and Propaganda 193

8.7 U.S. Individuals Working in Foreign Countries 193

8.8 Non-U.S. Individuals Working in the U.S.: Verifying Legal Status 194

8.9 Financial Reporting 195

8.10 U.S. Tax Reporting of Foreign Activities 195

8.11 U.S. Tax Withholding on Payments to Non-U.S. Citizens or Residents 197

8.12 Reporting of Foreign Financial Assets 202

8.13 Review and Further Considerations 204

CHAPTER 9 Additional Foreign Legal and Practical Considerations 211

9.1 Finding the Right Local Counsel 211

9.2 Anti-Terrorism Restrictions 213

9.3 Restrictions on Cross-Border Funding 215

9.4 Restrictions on Sending Goods across Borders 217

9.5 Anti-Bribery Laws and Avoiding Corruption 218

9.6 Restrictions on Political Activity and Lobbying 221

9.7 Protecting Trademarks, Copyrights, and Other Intellectual Property 223

9.8 Data Privacy Laws 229

9.9 Privacy 231

9.10 Managing Multiple Currencies and Currency Controls 232

9.11 International Travel and Security 233

9.12 Insurance Matters 233

9.13 Acquiring Real Estate 234

9.14 Value Added Tax (VAT) 234

9.15 Other (Non-Income) Taxes 236

9.16 Governmental Reporting Requirements: Financial, Tax, and Others 238

9.17 Market and Political Impact of Foreign Direct Services 239

9.18 Review and Further Considerations 239

CHAPTER 10 Evolution of a Global Organization: Half the Sky Foundation 245

10.1 Seeing a Need and Addressing It with Passion 245

10.2 Half the Sky’s Experience in China 247

10.3 Legal Status of HTS in China 252

10.4 What Has HTS Learned about Working in China? 254

10.5 Developing a Global Fundraising Network 255

10.6 Closing Thoughts 259

APPENDIX A Glossary of Terms 261

APPENDIX B Additional Resources 271

Resources for 501(c)(3) Organizations 271

Resources for Private Foundations 271

International Activities of Nonprofit Organizations 272

U.S. Intermediary Organizations for

International Grantmaking 272

Resources for Cross-Border Grantmakers 272

Resources for Finding International Collaborators 273

Resources on Foreign Country NGO Laws 273

Avoiding Participation in Corruption (Anti-Bribery) 273

Updates on Anti-Terrorism Policies and Their Impact on Nonprofit Organizations 274

Intellectual Property 274

APPENDIX C U.S. Bilateral Income Tax Treaties 275

About the Companion Website 277

About the Author 279

Index 281