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INTERNATIONAL GIVING BY CORPORATIONSAs noted, foundation grants to public charities need not be the subject ofexpenditure responsibility. If the prospective grantee is a charitable organizationother than a public charity or qualified operating foundation, though, expenditureresponsibility must always be exercised.In making the determination that the prospective grantee organization is publiclysupported, a private foundation must obtain documentation of the sources ofthe prospective grantee’s financing. The prospective grantee must also inquirewhether the proposed grant would reduce the general public and/or governmentsupport below the required level of public support to qualify as a publicly supportedcharity, thus changing (or tipping) the grantee from status as a public charityto a private charity.If the grantee is a public charity and will remain so even with the proposedgrant, the answer to the question as to whether the private foundation will haveto exercise expenditure responsibility depends on the nature of the organizationunder several categories established in U.S. tax law.Determination of whether expenditure responsibility is required for grantsto overseas donees takes the following five forms:1. When the grant is made to a governmental unit, expenditure responsibilityis generally not required. 272. When the IRS has determined that an organization is publicly supported,expenditure responsibility is generally not required. 283. Whether or not the organization has been classified by the IRS as publiclysupported or substantiated by its legal counsel as the equivalent of a publiclysupported organization, expenditure responsibility is generally notrequired if two conditions are met:a. The organization, according to the reasonable judgment of the foundationmanager, establishes that it is the equivalent of a publicly supportedorganization, andb. Supporting data is in the form of an affidavit or legal opinion providedby the donee organization’s legal counsel. 294. If the organization is a tax-exempt charitable organization by virtue of anIRS determination, but is not publicly supported, or if legal counsel hassubmitted an opinion that the organization is an equivalent of a taxexemptcharitable organization but does not qualify as the equivalent of apublicly supported organization, expenditure responsibility must beexercised.5. Otherwise, expenditure responsibility is mandatory. A further safeguardis required: Grant funds must be segregated into a separate accountablefund.27 Reg. § 53.4945-5(a)(4)(iii).28 IRC § 4945(d)(4)(A).29 Reg. § 53.4945-5(a)(5). 572