Technical Note Authorized grantees. Relevant information.

The authorized grantees are civil organizations or trusts that have an authorization granted by the International Revenue Service to get deductible donations from the income taxes. They can be constituted principally like associations, civil societies, and institutions of private assistance or trusts.

It is necessary to mention that the authorization as authorized grant does not represent a transformation of the civil organization since it is still keeping its registered name.

According to what has been established in the articles 82, 83, 84, and 79, sections VI, X, XI, XII, XIX, XX, and XXV of the la of income tax and the articles 36 and 134 of the regulation of the income law taxes, could receive and authorization to be an authorized grantor, the natural nonprofit people that develop some of the following activities:

1. Assistance: are those that have as a target to help people, sectors. Or regions of low resources, to indigenous communities, vulnerable groups due to age, sex or disabilities.
2. Educational: are those that have as an objective to share education when they have an authorization or a recognition of official validity of studies.
3. Scientific of technological investigation: the ones dedicated specially to the scientific or technological research as long as they are enrolled in the National Registry of Technological Scientific Institutions and Enterprises of the National Council of Science and Technology.
4. Cultural: destined to activities such as promoting and disseminating music, plastic arts; to the protection, conservation, restoration and recovery of the nation’s cultural heritage, among others.  
5. Ecological: the ones that are dedicated to the research or preservation of wild, terrestrial or aquatic flora and fauna within the geographical areas determined by the Tax Administration Service.
6. Of preservation of species in danger of extinction: those activities dedicated to the reproduction of species in protection and danger of extinction and the conservation of their habitat, previous opinion of the Secretariat of Environment and Natural Resources.
7. Scholarships: those dedicated to the granting of scholarships as long as these are granted to carry out studies in educational institutions that have authorization or recognition of official validity or in the case of institutions abroad recognized by the National Council of Science and Technology.
8. Public works and services: those that carry out public works or services that the Federation, the states or the municipalities must carry out.
9. Of social development: dedicated, among others, to the promotion of the organized participation of the population in actions that improve their own subsistence conditions for the benefit of the community.
10. Of economic support: those that contribute economic resources to moral persons authorized to receive deductible donations.
11. Museums and Private Libraries: those dedicated to the establishment of libraries and / or museums that are open to the general public.
12. School-Company: those that execute school-business programs, which are part of the curriculum or object of organizations that obtain the authorization to receive deductible donations.

Social statutes

In these cases, the activities dedicated to the civil organization are listed and, to a large extent, the authorization or rejection of the application depends on them. The constitutive deed or trust agreement must expressly indicate the following:

1. That the civil organization or trust allocates its assets exclusively for the purposes of its corporate purpose.
2. That at the time of its liquidation or change of residence for tax purposes, it will allocate its assets to moral persons authorized to receive deductible donations.

On the other hand, the provisions listed below cannot be included in the bylaws or trust agreement:

1. Pursue a profit or perform remunerated activities.
2. Intervene in political campaigns or carry out propaganda for or against political parties or religious doctrines.
3. Include economic or commercial activities.
4. Give the assets of the organization in loan, mutual and trust, guarantee titles or credit operations, guarantee obligations in favor of third parties or grant sponsorships, subsidies or support other organisms or individuals.
5. Contain benefits or economic rights, such as, profits, remnants, loans, capital reduction, partition projects or reimbursement of contributions or social shares; or of disposition and enjoyment of the assets of the organization for the members of this.
6. Include sporting activities.

Requirements to obtain authorization.

The Tax Administration Service is the authority in charge of issuing the authorization certificate, which has an annual validity and must be renewed after said period.

Civil organizations or trusts that require authorization to receive deductible donations must comply with the following:

1. That its organization and operation be exclusively dedicated to comply with any of the activities indicated above.
2. Submit your application through the Tax Mailbox, noting: a) address to hear and receive notifications; and b) email and telephone number.
3. Constituent deed and current bylaws, the trust agreement and, where appropriate, modifications.
4. Document that serves to accredit the activities for which the authorization is requested. The presentation of said document may be omitted in the following cases:

i. The civil organization or trust has less than six months of constitution; or

ii. Having been established for more than six months, they have not operated or have not developed any of the activities for which they request authorization.

• The notarial instruments must contain the registration data in the corresponding Public Registry. In the event that such registration is in process, a letter signed by the notary public that granted the deed recording said circumstance must be attached.

The proof of authorization as authorized grantee derives in the inclusion of the civil organization or trust, in Annex 14 of the Miscellaneous Fiscal Resolution that is published in the Official Gazette of the Federation and in the Internet Portal of the Tax Administration Service. gives legal certainty to its potential donors.

Tax aspects.

The authorized grantees are taxed for tax purposes as a nonprofit legal entity in accordance with the provisions of Title III of the Law, so that, generically, they are not taxpayers of Income Tax.

In an illustrative but not limitative way, here are some of the fiscal obligations of an authorized grantee:

1. During the month of May of each year, you must make available to the general public the information related to transparency as well as the use and destination of the donations received.
2. Report any changes to its bylaws.
3. Issue the corresponding tax receipts for the donations received, which must comply with the requirements established by the Tax Administration Service.
4. To allocate the donations for the purposes of their corporate purpose. In any case, the grantees may allocate more than 5% of the donations received to cover administrative expenses in accordance with the provisions of Article 138 of the Regulations.
5. Inform the tax authorities of the donations received in cash or in national or foreign currency, as well as in pieces of gold or silver, whose amount exceeds $ 100,000.00 (one hundred thousand pesos 00/100 M.N.) or its equivalent in any other currency, no later than the 17th day of the month immediately following that in which said operation was performed.
6. Present annual declaration no later than February 15 of each year, in which they will inform the Tax Administration Service of the income obtained and of the expenditures made.

Authorized grantees can receive unlimited donations, either in cash or in kind, from residents in the country or abroad, and must issue the corresponding receipts.

Tax Benefits for Donors.

In Mexico the Law contemplates in chapter XI, article 151 (of the annual declaration), fraction III that donors may deduct from their accumulative income, the donations granted up to 7%, this in their annual declaration, as long as it is counted with the tax receipt of deductible donation on the ISR.

Corporate governance.

As of January 1, 2018, authorized grantees with total annual income of more than

$ 100,000,000.00 (one hundred million pesos 00/100 MN) or who have assets of more than

$ 500,000,000.00 (five hundred million pesos 00/100 MN) , must adopt, for the management and control of the corporate entity, corporate governance structures in accordance with the general rules issued by the Tax Administration Service. However, to date these guidelines are not known.

Authors

Raúl Rodríguez Echeverría – Founding Partner

Carolina Mendoza Alba – Senior Associate