How to Be a Global Nonprofit

LISA NORTON is an attorney whose law practice concentrates on serving a wide variety of nonprofit and tax-exempt organizations, helping organizations and donors to pursue their missions through proper structuring and legal compliance. Previously, she served as international tax counsel to several multinational corporations. She is a graduate of Harvard Law School and a member of the bar of the states of Washington, California, and New York. Lisa participates in various bar association committees and professional organizations that concentrate on nonprofit-related issues, and she has served on governing boards and committees of numerous charitable organizations and professional associations. Visit her website at www.lnortonlaw.com, and follow her on Twitter @GlobalNonprofit.

• List of Case Studies xiiiPreface xvHow to Use This Book xviiiDisclaimer xixInternal Revenue Service Circular 230 Disclosure xxAcknowledgments xxiiiChapter 1 So You Want to Be a Global Nonprofit? 11.1 What Do You Really Want to Accomplish? 11.2 Spectrum of International Activities 21.3 Overview of International Grantmaking 31.4 Directly Operating Foreign Programs 121.5 Global Fundraising 171.6 Legal Considerations: A Basic Framework 171.7 The Importance of Vigilance 251.8 So, You Still Want to Be a Global Nonprofit? 27Chapter 2 International Grantmaking by Public Charities 292.1 Public Charity or Private Foundation: Why Does It Matter? 302.2 What is a Public Charity? 302.3 Basic Rules for Foreign Grantmaking 322.4 American Friends of Organizations 392.5 Special Rules for Donor-Advised Funds 392.6 Other U.S. Intermediaries 402.7 Review and Further Considerations 40Chapter 3 International Grantmaking by Private Foundations 433.1 What is a Private Foundation? 433.2 Should a Private Foundation Make Cross-Border Grants? 453.3 Permitted Grants and Disbursements 453.4 International Grantmaking: Special Requirements for Private Foundations 483.5 U.S. Withholding Tax on Disbursements of Grant Funds 523.6 Review and Further Considerations 52Chapter 4 Going Deeper: Operating a Foreign Program 554.1 Are You Determined to Move Beyond Grantmaking? 554.2 Is Anybody Else Doing It? 564.3 Are You Sure You Will Be Allowed to Do What You Want to Do? 584.4 Alternative Models for Operating a Foreign Program 594.5 Establishing a Foreign Office 604.6 Do You Need to Do It Alone? 664.7 Staffing a Foreign Office: Consequences to the Organization 694.8 Will Your U.S. Organization Be Taxed by a Foreign Country? 704.9 What Happens If Your Organization Conducts Business Activities in a Foreign Country? 764.10 Foreign Reporting Requirements 794.11 U.S. Reporting Requirements 794.12 Review and Further Considerations 79Chapter 5 Forming and Operating through a Foreign Legal Entity 855.1 Establishing a Foreign Legal Entity 855.2 How Hard Will It Be to Form a Foreign Legal Entity? 935.3 What Kind of Legal Entity Should You Create, and Why Should You Care? 945.4 Do You Want a Model of Control or Collaboration, or Both? 1025.5 Control 1035.6 Collaboration 1075.7 Two Case Studies: One Very Large and One Very Small Organization 1085.8 Headquarters Offices: Centralized versus Decentralized Services 1125.9 Shared Employees 1205.10 Will a Foreign Legal Entity Be Tax-Exempt in Its Local Country? 1215.11 Will a Foreign Legal Entity Be Taxed in the United States? 1235.12 The Importance of Keeping U.S. and Foreign Activities Separate 1255.13 Consider the Burdens of Maintaining Two or More Separate Legal Entities 1265.14 For-Profit Subsidiaries 1275.15 Soliciting Funds from U.S. Donors 1275.16 Review and Further Considerations 128Chapter 6 Staffing Foreign Operations: Employees and Volunteers 1336.1 Staffing Foreign Operations: Will You Send U.S. Staff or Hire Locally? 1336.2 Sending People Overseas: Initial Considerations 1346.3 If You Send U.S. Employees to Work in a Foreign Country, Will They Be Taxed There? 1356.4 If Your Employees Are Taxed in a Foreign Country, Will They Still Be Taxed in the United States? 1376.5 Making Payments to People Working in Foreign Countries 1416.6 Hiring Locally 1426.7 Hiring or Sending Non-U.S. Citizens/Residents to Work in the United States 1436.8 Special Considerations for Volunteers 1466.9 Review and Further Considerations 148Chapter 7 Raising Funds Globally 1537.1 Why Do You Want to Raise Funds in a Foreign Country? 1537.2 Will You Be Permitted to Solicit Contributions in a Foreign Country? 1547.3 Does the Foreign Country Provide Tax Benefits, and Are They Important to Your Donors? 1557.4 Is a Separate Legal Entity Required? 1567.5 Tax Benefits for Cross-Border Philanthropy 1587.6 Exceptions to the Separate Legal Entity Requirement for Fundraising in Foreign Countries 1627.7 Structuring Relationships among Fundraising and Operating Entities 1667.8 Keep It as Simple as Possible 1677.9 Review and Further Considerations 168Chapter 8 Additional U.S. Laws and Reporting Requirements 1738.1 Anti-Terrorism Compliance 1738.2 Export Controls 1818.3 Anti-Boycott Rules 1828.4 Anti-Bribery Rules 1848.5 Lobbying and Political Activity 1888.6 Foreign Funding of Lobbying and Propaganda 1938.7 U.S. Individuals Working in Foreign Countries 1938.8 Non-U.S. Individuals Working in the U.S.: Verifying Legal Status 1948.9 Financial Reporting 1958.10 U.S. Tax Reporting of Foreign Activities 1958.11 U.S. Tax Withholding on Payments to Non-U.S. Citizens or Residents 1978.12 Reporting of Foreign Financial Assets 2028.13 Review and Further Considerations 204Chapter 9 Additional Foreign Legal and Practical Considerations 2119.1 Finding the Right Local Counsel 2119.2 Anti-Terrorism Restrictions 2139.3 Restrictions on Cross-Border Funding 2159.4 Restrictions on Sending Goods across Borders 2179.5 Anti-Bribery Laws and Avoiding Corruption 2189.6 Restrictions on Political Activity and Lobbying 2219.7 Protecting Trademarks, Copyrights, and Other Intellectual Property 2239.8 Data Privacy Laws 2299.9 Privacy 2319.10 Managing Multiple Currencies and Currency Controls 2329.11 International Travel and Security 2339.12 Insurance Matters 2339.13 Acquiring Real Estate 2349.14 Value Added Tax (VAT) 2349.15 Other (Non-Income) Taxes 2369.16 Governmental Reporting Requirements: Financial, Tax, and Others 2389.17 Market and Political Impact of Foreign Direct Services 2399.18 Review and Further Considerations 239Chapter 10 Evolution of a Global Organization: Half the Sky Foundation 24510.1 Seeing a Need and Addressing It with Passion 24510.2 Half the Sky’s Experience in China 24710.3 Legal Status of HTS in China 25210.4 What Has HTS Learned about Working in China? 25410.5 Developing a Global Fundraising Network 25510.6 Closing Thoughts 259Appendix A Glossary of Terms 261Appendix B Additional Resources 271Resources for 501(c)(3) Organizations 271Resources for Private Foundations 271International Activities of Nonprofit Organizations 272U.S. Intermediary Organizations forInternational Grantmaking 272Resources for Cross-Border Grantmakers 272Resources for Finding International Collaborators 273Resources on Foreign Country NGO Laws 273Avoiding Participation in Corruption (Anti-Bribery) 273Updates on Anti-Terrorism Policies and Their Impact on Nonprofit Organizations 274Intellectual Property 274Appendix C U.S. Bilateral Income Tax Treaties 275About the Companion Website 277About the Author 279Index 281