US nonprofits seek refuge abroad

U.S.-based international nonprofits are rushing to register sister organizations overseas as they face an unpredictable political environment at home. Charity lawyers in Canada and the United Kingdom told Devex they are experiencing a surge of inquiries from U.S. nonprofits looking to establish overseas offices or entities. One Canadian law firm said it had seen a tenfold increase in demand compared to previous years, while a U.K. law firm with expertise in the charity sector said it had seen a fivefold increase in inquiries. U.S.-based charities and foundations, including those working in the global development and humanitarian space, are on edge amid a slew of actions and proposals from the White House that are affecting or could affect their work. That includes funding cuts, but also reports that Trump has considered banning overseas grantmaking, might strip some organizations of their tax-exempt status, or that groups could be disbanded entirely amid spurious accusations that some nonprofits are supporting terrorism. Already, one foundation — the Open Society Foundations — has been threatened with investigation, according to media reports. The recent announcement from a major U.K.-based grantmaker — the Children’s Investment Fund Foundation — that it would halt funding to U.S.-based organizations due to a lack of regulatory clarity has also caused nervousness that other funders might follow suit. For many nonprofits, the unpredictability of the situation requires scenario planning. For those groups working internationally that do not already have overseas affiliates, establishing an entity elsewhere could not only open the door to other sources of funding, as opportunities in the United States dry up, but also offer a backup option in a worst-case scenario where it becomes difficult to continue working from the U.S. Mark Blumberg, a charity law expert based in Toronto, Canada, told Devex that his firm Blumbergs Professional Corporation had seen a tenfold increase in U.S. nonprofits retaining its services to establish Canadian affiliates over the past eight months. The company is now running courses — including an upcoming one with the American Bar Association — to advise organizations that might be considering such a move. “It appears that there has been heightened interest in US groups establishing entities in Canada, and likely in other countries as well,” Blumberg said. There are concerns that operating in the U.S. could become increasingly difficult, and some groups are taking “proactive steps” to protect themselves, their staff, and beneficiaries, he said. “These steps could include granting out greater amounts of funds to grantees and establishing new independent entities in other countries that can continue operations if the regulatory climate for nonprofits in the US continues to decline.” As well as existing organizations, Blumberg noted that “many groups that might have in the past formed an international charity in the US are now hesitant to do so because of the political uncertainty.” Charity lawyers in the United Kingdom are also reporting increased interest, with those who spoke to Devex pointing to pull factors rather than push factors. Pippa Garland, a charity law expert and partner at Russell Cooke, said her firm had seen a fivefold increase in inquiries from U.S. nonprofits interested in establishing themselves in the U.K. over the past six months, while James Maloney, partner at U.K. law firm Farrer & Co, reported a “noticeable” increase in interest over the past year from both charities and foundations. “There’s a long tradition of organizations working across both sides of the Atlantic, but I do think that we’ve seen an increase over the last year,” Maloney said. “We have seen, in some cases, organizations that haven’t had a U.K. presence looking to set up a structure here in the U.K. alongside their existing U.S. nonprofit. In some cases, we’ve seen organizations that already have some presence here in the U.K. … do a little bit more here, perhaps bring some more operations here, employ some staff here. And in some cases we’ve seen philanthropists, founders, people who might be right at the beginning of the journey [of] setting up a nonprofit, looking seriously at the U.K. alongside other options internationally, [whereas] perhaps in the past they might have defaulted to one jurisdiction or another.” The U.K. lawyers pointed to drivers, including a desire for organizations to expand their funding bases, geographical advantages to being in the U.K. for those working internationally, and a growing interest among U.S. professionals in moving to Europe. Garland said the U.K. had always been attractive to U.S. organizations looking to establish an international presence due to its language, timezone, strong regulatory environment, and long history of respect for the independence of civil society. “When there’s any type of change or instability within a sector, people look at insurance options, or changes of strategy, or other avenues to grow. And I think the U.K. is seen as one of those markets where you can grow and expand your international presence … [and] essentially engage in future proofing,” she said. For organizations that might have been considering opening international branches for a while, the political situation may be sparking them to move now. That includes the Committee to Protect Journalists, which is in the process of establishing a legal entity in the United Kingdom. Chief Executive Jodie Ginsberg told Semafor that the decision was driven by a long-term plan to expand fundraising internationally, as well as “the actions of the new administration [which have] certainly focused our minds.” The Clooney Foundation for Justice is another big U.S. organization that joined the U.K. charity register this year, but the group did not respond to a request for comment about the decision. However, the lawyers warned that establishing an entity overseas comes with various complications, including potential tax implications and new regulatory burdens, and shouldn’t be undertaken lightly. They advised organizations to think carefully about what they are hoping to achieve and whether opening a new entity is necessary to achieve it. An experienced leader in the U.S. nonprofit sector, who asked for anonymity due to the political sensitivity of the situation, agreed. Not only is there an initial cost to opening an office overseas, but there are also long-term implications in terms of organizational structure that can be complicated to undo further down the line, they said. But, they added, “depending on how dangerous you think the moment is, it may make real sense to do that.”