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Chapter XVII - Establishing NPOs Outside India

Quite a few Indian NPOs have set up overseas entities to raise funds and provide tax deductions to overseas donors who are taxpayers in their respective countries. Several leading Indian NPOs have set up entities in the USA, the UK, the Netherlands, and Singapore. Let us take the example of setting up such an entity in the USA. If one wishes to set up a non-profit 501(c)(3) in the USA one must first incorporate the entity in a State of their choice (Delaware is generally preferred by many) and obtain tax recognition (much like it is in India). The entity may be incorporated to support either a single or multiple NPOs in India. Once this is done, tax paying US citizens or US companies may contribute to this entity and enjoy tax deductions. Funds from this 501(c)(3) may be wire transferred to the NPO in India only if the NPO in India has FCRA registration or prior permission. In like manner one may set up such an entity in any other country as well and that entity would be governed by the rules of that country.

Setting up an NPO in the USA

In the US, the first step is for a non-profit organisation to incorporate in one of the fifty US states as an entity that is technically independent of the Indian-based non-profit with the intention of collaboration across both entities. This organisation needs to then apply for 501(c)(3) tax-exempt status at the federal level by filing Form 1023. It could take a few months for the IRS to approve 501(c)(3) status. To fundraise nationally across the USA (even through e-mails), the organisation needs to register in all fifty states (not just in the one they are incorporated in), although many organisations put this off for a few years and fines are not commonly imposed for the delay.

Establishing NPOs Outside India

A few of the essential steps for registration includes:

  1. Choosing a name and filing articles of incorporation with the corporate filing office of one of the fifty US states

  2. Submitting a federal 501(c)(3) tax exemption application to the IRS along with a copy of the filed articles of incorporation. This will lead to the US NPO getting an IRS determination letter and ID number in approximately nine months

  3. Applying for state tax exemption, if applicable

  4. Drafting by-laws (to be adopted in the first board meeting), appointing directors (most states require at least 3), and holding the first board meeting

  5. Obtaining licences and permits, mostly at the local and state level

If an Indian NPO wishes to establish a growing network of supporters, ambassadors, allies, and partners in the US to support their work in India and/or their growth internationally, setting up a 501(c)(3) organisation in the US would be a prudent strategic move to help expand presence and impact globally.

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