Remarks at the Launch of the Department of State's Global Philanthropy Working Group
Secretary of State
The video below is available with closed captioning on YouTube
Now, I am told that the combined endowments of the foundations represented in this room total around $50 billion. But I want to make it clear from the start I am not here to ask you for anything. I’m here for a different purpose. I want us to find more ways we can work together.
We want to, as I just said in my remarks, do a better job partnering and really supporting one another, and frankly, leveraging each of our respective expertise in the work that we do. And our Global Partnership Initiative is bringing together the philanthropic and private sector, and I think we’ve got to make this not just a once in a lifetime or even once a year meeting, but to try to partner in a good way with you to help you do what you do even better with more impact.
I want to mention two areas that I think we can see progress. The first is how we can make it easier for American charities to fund overseas work. And today, I’m announcing a major step we’re taking to reduce one of the biggest obstacles you face, so-called equivalency determinations.
Under current U.S. tax rules, every time you give a grant to a foreign civil society organization, you have to prove that the organization would qualify as a tax-exempt one if it operated in our own country. And that process, as I don’t need to tell you, can cost as much as $10,000 in legal fees. And each foundation must go through this process on your own, even if the grantee has already been qualified by another foundation. That’s just redundant and it serves no real purpose.
So thanks to the Treasury Department – and Ruth Madrigal is here representing the Treasury Department – those regulations are being changed to reduce this burden dramatically. Now, in making equivalency determinations, foundations can rely on advice from a broader range of tax professionals, not just attorneys, which will make the process easier and far less expensive. And although it’s not specifically addressed in the new rules, this change will clear the way for foundations to set up organizations that can serve as repositories of this determination, meaning this would only need to be done one time. And Treasury and State will work together with you to try to create such a clearinghouse of information that would then be accepted as reliable.
Now, this could change the average cost of the determination from the $10,000 to approximately $200, and then that of course frees up more money for you to put to work. I know this has been a longtime priority for many of our foundations, and I want to thank both the IRS and Treasury for working very hard to develop these rules.
Now, I know there are still other obstacles you confront, such as laws in other countries that severely limit how much funding their civil society groups can accept from you. And we want you to help us help you, telling us what more we can do to help clear the way so that you can be able to work more directly without so many limitations.
That brings me to the second area that I want to mention, namely what we are calling strengthening the ecosystem for philanthropy overseas. We obviously have in our country a tradition of private philanthropy that goes back to our earliest days, and today private giving to overseas organizations actually outstrips our official development assistance. If you take every not-for-profit, NGO, faith-based organization, it’s a remarkable demonstration of American generosity.
But as you and I both know, many societies do not have such a tradition, and some governments actually have policies that discourage philanthropy. Many nations in Europe, for example, impose a 20 percent value-added tax on charitable donations, which creates a very powerful disincentive for people to give. In other cases, rapid growth is creating scores of potential new donors, but there isn’t a strong tradition of what philanthropy can mean, even to institutions that certainly draw a lot of our private philanthropy in our country. According to Forbes, for example, there are 96 billionaires in Russia and 95 in China. And I know that Bill Gates and Warren Buffet have done their best to try to convince some of the new rich around the world to start thinking as philanthropists, but what more can we do to encourage a culture of giving and develop such an ecosystem that is conducive to philanthropy.
And finally, I want to know from you what we’re missing. We’re thinking hard about cross-border giving and a stronger philanthropic ecosystem, but what else should be on our agenda? How else can the United States Government make it easier for you to work with us and to accomplish your own goals? So I am very grateful that you would take time out to meet with our team, and now let me turn it over to our colleagues.
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