What is an Equivalency Determination (ED)?

Through Equivalency Determination, a grantmaker gathers information and materials in order to a make a good faith determination that the organization is the equivalent of a U.S. 501(c)(3) public charity. Equivalency Determination is a required procedure whenever making a general support grant.

Does Paragon charge a membership fee as part of the Equivalency Determination PLUS Service?  

No. Paragon is dedicated to reducing the barriers to cross-border philanthropy. In line with this vision, we are committed to making it as easy as possible for grantmakers to quickly secure Equivalency Determinations, including ready-to-go EDs in the repository.

How is Paragon's Equivalency Determination PLUS service different? 

Paragon provides a comprehensive service. We not only source the ED letter and analysis (prepared by a collaborating outside Qualified Tax Practitioner that issues the ED to the grantmaker) but we also carry out steps you would otherwise implement in-house for an international grant:  pre-screening to identify any red flags indicating an organization might not “pass” ED, anti-terrorism financing screening (SDN search, etc.), reviewing foreign country regulations affecting the grantmaker and the grantee, securing grantee signatures, obtaining wire transfer information, (including verbal verification of details) and confirming receipt of funds. By contrast, the fee charged by many ED providers usually includes only the ED itself.

How long does an Equivalency Determination take?  

The ED process usually takes from 3-5 weeks, with time elapsed depending on the responsiveness of the grantee. Once we have received all of the required documents from the grantee, turn-around time is several days.

How long is an Equivalency Determination valid?

EDs are valid for up to two years. Specifically, the ED is valid two years from the end of the last accounting period for which financial information is received. For example, if a grantee provides financials through their accounting year ending December 31, 2020, the ED would be valid through December 31, 2022.

How can we benefit from the ED repository?

Any ED completed by a collaborating outside Qualified Tax Practitioner enters into the repository and becomes available to other grantmakers at a discount as long as the ED is current. This repository ED can be purchased from the collaborating Qualified Tax Practitioner on a stand-alone basis, or in conjunction with Paragon’s back-office services, which include anti-terrorism financing screening, review of regulations in the foreign country affecting the grantee and the grantmaker, transmission of the grant agreement to the grantee for signature, securing wire transfer information, and confirming grantee receipt of funds.

What information is requested from the grantee during the Equivalency Determination process?

In addition to providing key organizational documents, the grantee is asked to complete an affidavit for non-U.S. grantees and a public support form*. The affidavit includes a series of specific assertions from the grantee and references documents the grantee should supply, including their charter, bylaws and other governing documents, and a list of the organization’s board of directors and key employees. The public support form allows the Qualified Tax Practitioner to determine whether the grantee will pass the "public support test." To pass the public support test the organization normally must, over a five-year period, receive at least 33.33% of its total revenues as gifts or contributions from a broad section of the general public (though it can be as little as 10% if other “facts and circumstances” are present). The grantee is asked to enter information into the form on gifts, grants, contributions, and membership fees etc.

*Churches, schools, medical institutions, or government instrumentalities are not required to meet the public support test and are deemed publicly supported.