Equivalency Determination FAQs


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 your Equivalency Determination PLUS Service?  


How is Paragon's Equivalency Determination PLUS service different from that of other ED providers? 

Unlike other ED providers, Paragon provides a comprehensive service. We not only provide the ED letter and analysis (generated by an outside contracting Qualified Tax Practitioner) but we also carry out steps you would otherwise have to implement in-house for an international grant:  ED 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, reviewing any grant agreement, securing grantee signatures, obtaining wire transfer information, and confirming receipt of funds. By contrast, the fee charged by other ED providers usually includes only the ED letter itself.   Compare our ED Service to other providers ›

How long does an Equivalency Determination take?  

The ED process usually takes from 3-4 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. Churches, schools, medical institutions, and government instrumentalities are not required to meet the public support test, are deemed by the IRS to be publicly supported, and no financials are required for the ED review. For these organizations, the ED is valid for two years from the date the ED letter is issued. For organizations that do not meet the above description, the public support test applies and five years of financials are usually required. Under this scenario, 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, 2016, the ED would be valid through December 31, 2018.

How can we benefit from Paragon’s ED repository?

Any ED made by an outside contracting 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 on a stand-alone basis, or in conjunction with Paragon’s supplemental back-office services, which include anti-terrorism financing screening, review of regulations in the foreign country affecting the grantee and the grantmaker, review and 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?

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 us 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, membership fees etc. over the past five years.

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