Contributions to Foreign Charities
Gifts to foreign charitable organizations are generally deductible for gift tax but not income tax purposes. Furthermore, the IRS has ruled that in the following kinds of situations, contributions to a domestic charity that has been validly created in the United States are nondeductible, because of the way they are funneled to a foreign charitable organization:
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A foreign charity creates a domestic charity, whose sole purpose is to remit its net contributions to the foreign charity.
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A group of U.S. citizens create a domestic charity, whose sole purpose is to receive and transmit contributions to a foreign charity.
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A foreign charity enters into an agreement with a domestic charity, under the terms of which the latter solicits funds for the former, representing to prospective contributors that the raised funds will be sent to the foreign organization. (In this kind of situation, contributions to the domestic charity that are not earmarked for transmittal to the foreign charity are deductible.)
Are there ways for donors to support overseas activities that will generate income tax deductions? The IRS has ruled that where a domestic charity (to which contributions generally are deductible) conducts certain charitable activities in a foreign country, it may, without forfeiting its status, make grants to foreign charitable organizations engaged in the same kind of activities in the foreign country or establish a subsidiary in that country [Rev. Rul. 63-252, 1963-2 C.B. 101]. In addition, a domestic charity may create a wholly owned foreign subsidiary to take title to contributed realty so long as the domestic charity receives substantial benefit from the contribution (PLR 8042173). Contributions also have been held deductible where a U.S. charity provides grants for foreign charitable causes, so long as the money is used to further the charitable goals of the U.S. charity and it maintains control over the use of donated funds (PLR 8839029).
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Charitable Giving
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