The Equivalency Determination Playbook
US private foundations making cross-border grants must either obtain an Equivalency Determination (ED) or exercise Expenditure Responsibility (ER). This playbook covers IRS Revenue Procedure 92-94, the ED-vs-ER decision, the evidence package required, and the shared-ED model that Attestyx uses to compress 6-8 weeks of legal work to roughly 4 days.
1. The two paths under IRC Section 4945
Under Internal Revenue Code Section 4945(d) and (h), a US private foundation that grants to a foreign organization must either: (a) obtain a written Equivalency Determination that the foreign grantee is the equivalent of a US public charity under Sections 501(c)(3) and 509(a)(1), (2), or (3); or (b) exercise Expenditure Responsibility, which requires a pre-grant inquiry, written agreement, separate accounting by the grantee, ongoing reports, and full reporting on Form 990-PF for the lifetime of the grant.
2. ED-vs-ER decision tree
| Factor | Lean ED | Lean ER |
|---|---|---|
| Grant size relative to foundation budget | Material; recurring is likely | Small or one-off |
| Grantee documentation quality | Strong (audited financials, governance docs available) | Sparse or in non-English forms |
| Counsel cost vs grant size | ED cost < 10% of grant value over relationship | ER admin cost lower than ED |
| Likely future grants | Yes (ED is reusable for 2 years) | No (one-time) |
| Donor-advised funds in flow | ED required; DAFs cannot exercise ER | n/a |
| Public-support test risk for grantee | Strong support history | Funded primarily by single donor |
3. Evidence package for ED (Rev. Proc. 92-94 / 2017-53)
A complete ED file under current IRS guidance includes the following. Attestyx structures the document vault and Verdict Engine output to map directly to this list.
- Grantee constitutive documents (charter, articles, by-laws) with English translation
- Statement of activities for the prior 4 years
- Financial statements for the prior 4 years (audited where available)
- Public-support computation under Section 509(a)(1)/(2) test, if applicable
- Affidavit signed by an officer of the grantee attesting to facts
- Written opinion of qualified tax practitioner that the grantee qualifies
- Currency and language conversion notes
- Beneficial ownership and key-person disclosures
4. The shared-ED model
Each US foundation traditionally pays $5,000-$15,000 to repeat the same ED work on the same grantee. Under the Attestyx shared model, the ED evidence package - everything except the foundation-specific opinion letter - is assembled once, anchored to CourtChain, and reusable by every participating US foundation. The opinion letter remains foundation-specific and is produced by the foundation's own counsel; what is shared is the underlying evidence file.
| Step | Traditional ED | GrantsProof shared ED |
|---|---|---|
| Document collection | 4-6 weeks | 0 (already in vault) |
| Translation and currency conversion | 1-2 weeks | 0 (cached) |
| Public-support test computation | 1 week | Auto-computed in Verdict Engine |
| Beneficial-owner verification | 1 week | Auto via 17 BEN checks |
| Counsel opinion drafting | 1-2 weeks | 2-3 days, working from anchored evidence |
| Total elapsed | 6-12 weeks, $5K-$15K | 3-5 days, $1K-$3K (counsel only) |
5. ER alternative when ED is not viable
For grantees that cannot meet the 501(c)(3) public-charity equivalent standard - many community-based organizations and individual fiscal sponsors - Expenditure Responsibility is the only path. ER requires:
- A pre-grant inquiry establishing the grantee can carry out the charitable purpose
- A written grant agreement with restrictions on use, recordkeeping, and reporting requirements
- Separate accounting by the grantee (not commingled with general funds)
- Annual reports from the grantee until grant funds and any income are fully expended
- Full reporting on Form 990-PF for the year of grant and every subsequent year until completion
Attestyx packages each of these as anchored milestone events. Pre-grant inquiry is the application + Verdict Engine output; the grant agreement is the on-platform contract; separate accounting is verified via the FIN checks and PRG outcome verification; annual reports are the recurring milestone packages; Form 990-PF reporting is machine-extractable from the platform's grant register.