What Is a Qualified Charity? It Depends
A qualified charity for purposes of the income tax charitable deduction is a gift to:
• a state, a possession of the U.S., or any political subdivision of a state or a U.S. possession or the District of Columbia, but only if the contribution is made exclusively for public purposes [Code §170(c)(1)];
• a corporation, trust, community chest, fund or foundation created or organized in the U.S. or in any U.S. possession or under a law of the U.S., a state, the District of Columbia or a possession of the U.S.;
organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, or to foster national or international sports competition (but only if the organization is not involved in furnishing athletic facilities or equipment) or for the prevention of cruelty to animals or children;
no part of the net earnings of which inures to the benefit of any private shareholder or individual;
which is not disqualified for tax-exempt status under Code §501(c)(3) by reason of attempting to influence legislation; and
which does not participate or intervene in any political campaign for public office [Code §170(c)(2)];
• a war veterans organization, or an auxiliary unit of such an organization, or a trust or foundation for a war veterans organization
organized in the U.S. or a U.S. possession and no part of the net earnings of which inures to the benefit of any private shareholder or individual [Code §170(c)(3)];
• a domestic fraternal society, order or association operating under the lodge system, but only if the contribution in question is made by an individual and the contribution is to be used exclusively for religious, charitable, scientific, literary or educational purposes or for the prevention of cruelty to animals or children [Code §170(c)(4)];
• a cemetery company owned and operated exclusively for the benefit of its members, or any nonprofit corporation chartered solely for burial purposes, no part of the net earnings of which inures to the benefit of any private shareholder or corporation [Code §170(c)(5)].
An income tax charitable deduction is generally not permitted for foreign organizations, although contributions to U.S. charities can be used for foreign activities of a domestic charity. The U.S. charity must not simply serve as a conduit to transmit contributions to a foreign organization.
The types of organizations qualifying for deductions for estate tax purposes are generally the same, except that:
- A trust need not be operated exclusively for charitable purposes under Code §2055(a). It is only required that the contribution to a trust be used exclusively for charitable purposes;
- A gift to a foreign charitable corporation may be deductible under Code §2055, provided funds are used exclusively for religious, educational, medical or social purposes.
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