Granting Money from a U.S. Charity or Church to a Foreign Individual or NGO: Substantial Risks and Best Practices

By H. Robert Showers, Esq. and Justin R. Coleman, Esq.

Updated 2026

Churches and nonprofit organizations often carry out their charitable and religious missions beyond the United States by supporting missionaries, global workers, foreign ministry partners, and non-governmental organizations (NGOs).

While these endeavors are exciting, they unfortunately can be complicated and risky. One of the primary areas of risk, among many others, involves the organization fundraising and donating money abroad. This risk is particularly important for an organization to consider because it can implicate, and possibly endanger, the organization’s tax exemption. For example, if the U.S. charity is in the habit of granting or transferring funds from their United States accounts to foreign individuals or foreign entities, such activity, while it may be essential to ministry, unnecessarily increases their legal liability exposure. This problem can be reduced by implementing some basic, IRS-mandated reporting requirements to document the use of funds.[1]

These risks are also not hypothetical and federal regulators have imposed civil and criminal penalties against organizations. In June 2025, OFAC sanctioned five individuals and five sham charities abroad for funneling money to Hamas’s military wing and a separate charity tied to the Popular Front for the Liberation of Palestine (PFLP)—charities that, the Treasury Department found, raised funds from donors largely unaware of their terrorist ties. Treasury’s 2024 National Terrorist Financing Risk Assessment makes clear that the nonprofit-sector risk is broader than sham charities.

For churches, mission organizations, and charities funding work abroad, the practical danger is that legitimate support for missionaries, global workers, or foreign NGOs may be misdirected without adequate screening, documentation, and control. Each year, many of these violations are flagged, and Homeland Security and the IRS pursue enforcement actions against nonprofits and churches. Yet, in most cases, for understandable financial and public-relations reasons, these matters are resolved quietly and confidentially.

Such enforcement is also not a new phenomenon. In 2004, OFAC froze the assets of the Al Haramain Islamic Foundation’s Oregon branch (AHIF-Oregon)—a charity organized in 1994 to aid poor and orphaned children in the Middle East—and designated it a specially designated global terrorist; the Ninth Circuit later affirmed OFAC’s authority to do so. Although the government could not prove the charity itself intended to fund terrorism, regulatory violations alone were enough to put it out of business and result in criminal penalties for its founder.

This case, and others like it, illustrate the complex laws and regulations that churches and nonprofits face for any foreign activity, whether collecting and sending contributions for foreign relief, sending short- and long-term missionaries abroad, sending money and resources to foreign NGOs, or compensating foreign pastors to spread the gospel in their countries.

Churches and religious organizations remain a major channel for money flowing overseas, and that flow keeps growing: Americans gave an estimated $617.2 billion to charity in 2025 according to Giving USA 2026, with $33.02 billion of that going to support International Affairs alone. Churches often send their share of this money directly to foreign individuals and informal ministry partners rather than through established U.S.-recognized relief agencies. The federal government requires assurance that this support is not unwittingly financing terrorism. Foreign giving cannot be treated as exempt from ordinary financial controls. Failure to comply with federal regulations exposes churches and mission organizations to significant liability and even criminal violations.

Funds from U.S. donors reach foreign mission hands in several ways:

• Sending money to a missionary employed by the organization to function in the field: buying a car, partnering with and funding other mission groups, or supporting a foreign national, which are sometimes processed as “expense reimbursements.” Example: a missionary wires $1,000 to a foreign national in the Philippines to support his ministry and then seeks reimbursement from the employing organization.
• Sending money through a church or U.S. charity to a foreign national working abroad, without approvals or documentation to confirm charitable use.
• Sending money to a partner foreign NGO without any grant agreement, reporting, or control, and without verification of charitable use.
• Sending money to a foreign NGO or national without checking the proper anti-terrorist lists.

For churches and nonprofit organizations that support work abroad, the key legal question is not simply whether the work is charitable or religious. It is whether the U.S. organization retains enough control, documentation, and oversight to treat donor contributions as deductible charitable gifts while later sending those funds to missionaries, global workers, foreign individuals, or foreign NGOs. If the organization functions merely as a pass-through, or if funds are sent without adequate screening and records, it may jeopardize its tax-exempt status, violate OFAC sanctions, or even create criminal exposure under the federal material-support statutes. Where foreign political activity is involved, the Foreign Agents Registration Act may also apply.

Sending money overseas to individuals without documentation proving OFAC compliance and exempt-purpose use endangers a U.S. charity’s tax-exempt status.

The danger of a U.S. tax-exempt organization giving funds directly from a donor to a foreign individual (or entity) is that it may violate the rules that granted it tax-exempt status in the first place. An exempt organization must be both organized and operated exclusively for one or more exempt purposes; failing either test can invalidate the exemption.[2] If more than an insubstantial part of the organization’s activities are not in furtherance of its exempt purposes, it is not tax-exempt. Grant-making must further an organization’s established exempt purposes in order to comply with federal laws.

A charitable organization is not precluded from supporting foreign entities and individuals, provided such distributions are made on a true charitable basis in furtherance of the purposes for which they are organized.[3] In order to demonstrate compliance, the IRS requires adequate record and case histories substantiating: (1) the name and address of each recipient; (2) the amount distributed to each; (3) the purpose of the aid; (4) the manner in which the recipient was selected; and (5) the relationship, if any, between the recipient and the organization’s insiders. These records must be maintained by the organization itself and cannot be delegated to the program’s operator or to a recipient entity.

The IRS has repeatedly denied exemption to organizations that could not document how they selected and monitored their foreign grant recipients.

For example, the IRS denied § 501(c)(3) tax-exempt status to an allegedly nonprofit organization because of inadequate oversight and recordkeeping. The organization sent stipends to students enrolled in a separate, foreign school, but relied on the school to keep records of the students’ eligibility. Moreover, the organization relied on a foreign national who ran the school program to ensure compliance in other areas, such as ensuring that the funds were not given directly to anyone who would be involved in terrorist activities as noted on the OFAC SDGT list (Office of Foreign Assets Control Specially Designated Global Terrorist).[4]

Similarly, the IRS denied tax exemption to an organization that claimed it was helping poor students in a foreign country by providing funds directly to the students. The IRS looked at several telling factors showing the organization was not tax-exempt either in purpose or in practice. First, the granting organization did not independently assess each student’s need. The funds were disbursed individually by the organization’s Director. Second, the granting organization was not run as a tax-exempt entity and did not maintain adequate records showing it was indeed tax-exempt. In fact, the authority for the granting organization’s operations was mostly delegated to foreign individuals and entities, including the Director of the Board. Third, the granting organization was not able to prove that it gave grants to students based on specific tax-exempt criteria. The granting organization used vague, uninformative, and contradictory criteria and could produce no documentation proving their grants were done solely and exclusively for exempt purposes, including when they were the subject of random spot checks.[5]

These illustrations matter because many churches and nonprofit organizations use similar practices without realizing that inadequate oversight, documentation, or screening may jeopardize their tax-exempt status and expose them to other violations of federal law.

Charities also risk losing their exempt status through other common missteps, such as transferring funds directly to nationals or foreign NGOs without reporting and authorization, or letting donors earmark gifts to individuals the charity has not yet approved.

These risks are manageable, but they require real structure, not just good intentions. At a minimum, organizations sending money abroad should screen every recipient against the OFAC sanctions lists before funds move and put a signed grant agreement in place with each foreign recipient that spells out how the money will (or will not) be used and how the charity will verify it. Further, the granting organization should keep documentation showing who received funds, why, and how they were selected for a prescribed statutory time period. None of this means your organization has to choose between its mission and its compliance obligations.

Balancing legal compliance with mission can be a challenge and it helps when your legal counsel understands how important it is to make the effort. Simms Showers helps make compliance easier for every client, so they can stay focused on accomplishing their important missions.

This overview covers the basics; the full-length article goes further, providing in-depth analysis of IRS and other rules for working internationally, including:

• The complete OFAC compliance picture: SDN and sanctions-list screening, the 2022 NGO general license, and current record-retention requirements;
• Full analysis of the IRS private-letter rulings that define what documentation and control your organization needs;
• The material-support statute and the Foreign Agents Registration Act’s religious exemption, explained in plain terms; and
• A practical, step-by-step compliance checklist your finance team can put to use immediately.

If your church or nonprofit is funding foreign nationals, entities, or NGOs, and you would like further advice, or to purchase the full article, please contact Simms Showers at info@simmsshowerslaw.com or call 703-771-4671.

Disclaimer: This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipient should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers LLP expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum

Simms Showers LLP © 2026

[1] This Article does not exhaustively address every legal issue related to these practices but focuses on the major liabilities that could threaten tax-exempt status and potentially create criminal exposure. The full-length version, updated for 2026, provides guidance for U.S. charities supporting individuals and entities abroad. Email info@simmsshowerslaw.com or call 703-771-4671 to purchase the full article.

[2] 26 C.F.R. § 1.501(c)(3)-1(a)(1)

[3] (Rev. Rul. 56-304).

[4] PLR 201001024 (I.R.S. 2010).

[5] PLR 200945068 (I.R.S. 2009).