Please settle a disagreement about whether we must have a grantee’s IRS determination letter on file.

We’re happy to! This is a pervasive myth, not a legal requirement. A photocopy of the IRS determination letter only tells you that the organization was, at some point, granted a specific tax-exempt status, not that this status is current.

As recommended by our colleagues at Project Streamline:

The best practice, if you have doubts about a potential grantee’s tax status, is to check it online using the IRS’s free Exempt Organizations search or a third-party source. Then you can note the date of the verification in your database or, if necessary, file a printout or screen image as documentation that the status is current. If the organization has anything other than public charity tax status, you may need to follow special due diligence procedures in making a grant.

We know that many grantmakers adhere to an IRS letter requirement at the advice of their auditors or legal advisors. The IRS’s description of Reliance Criteria for Private Foundations and Sponsoring Organizations may be useful in establishing why this is not a “must do.”

Exponent Philanthropy members qualify for discounts on GuideStar Charity Check, a one-stop due diligence tool that provides up-to-date information on all nonprofits in a user-friendly format.

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