THE GLOBALIZATION OF PHILANTHROPY: INTERNATIONAL CHARITABLE GIVING IN THE TWENTY-FIRST CENTURY

U.S. citizens are becoming more involved in international charitable activities, and consequently, the role of these activities in tax planning is becoming increasingly important. International charitable giving can involve giving directly to foreign governments, charitable entities in foreign nations, and domestic entities involved in international charitable activities. The tax implications of international gifts, including the exceptions created by international tax treaties, are discussed. The Section 170(c)(2) requirements thus prevent an organization created under foreign law, as well as foreign governments and international organizations, from receiving direct contributions that are deductible for U.S. income tax purposes. A nonresident alien may only obtain the benefits of the income tax charitable deduction (and other deductions) by filing an accurate U.S. income tax return. U.S. citizens or residents may deduct contributions to any foreign organization that is not a foreign governmental unit for estate and gift tax purposes so long as the organization uses the funds exclusively for charitable purposes and the foreign organization satisfies the prohibitions against private inurement and political campaign activities. Major planning opportunities that address the statutory prohibitions against income, gift, and estate tax deductibility are: 1. gifts that take advantage of favorable tax treaty provisions, 2. gifts to U.S. charities with overseas operations, 3. gifts to U.S. "friends of organizations that support foreign charitable activities, 4. gifts to U.S. private foundations that make grants to support foreign charitable activities, and 5. gifts to charitable entities or units organized by foreign governments and international organizations that are generally exempt from U.S. income tax under Section 892.