Utilizing intermediaries to simplify international giving

Few income tax treaties allow U.S. individuals to make deductible donations to foreign charities.

U.S. charitable organizations engaging in international philanthropy are subject to a number of restrictions on making grants to foreign organizations, some of these restrictions aimed at combating terrorism and increased enforcement of sanctions. Other challenges arise from the fact that the rules governing recognition of charities and the circumstances under which donors to charitable organizations may claim tax deductions or other benefits for their contributions is governed almost exclusively by the law of each separate jurisdiction.

A private foundation is subject to punitive excise taxes on grants to foreign organizations unless it either (i) obtains an equivalency determination that the recipient is the equivalent of a U.S. charity or (ii) exercises expenditure responsibility with respect to the grant. Obtaining an equivalency determination or exercising expenditure responsibility can be both costly and time consuming.

Hence, many U.S. private foundations, as well as individuals, choose to make grants to intermediaries that qualify as public charities rather than to foreign organizations directly.  A public charity is qualified as such because it raises its money from the general public and in turn donates funds and support to other organizations.

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