BlueSKy

You are here

Are these gifts earmarked for secret foreign charity?

Your Legal Questions Answered

Are these gifts earmarked for secret foreign charity?

I am concerned about a U.S. 501(c)(3) charitable organization that was set up by a nonprofit in the United Kingdom that works for the same causes. The U.S. group appears on the surface to be a conduit for this U.K. company.  It receives hundreds of thousands of dollars in donations every year and sends this amount to the U.K. in the form of a single grant to a deliberately unnamed U.K. charitable organization. Every year, the name of the U.K. charitable organization is left blank on the Form 990.

Shouldn’t the U.S. organization identify the grant recipient? If the recipient is the same organization every year, can the U.S. organization really be said to be exercising “control and discretion” in the release of these funds or could it be seen as a conduit to make a non-deductible gift to a foreign charity? Could it be said that the gifts are “earmarked” to the foreign recipient and not tax-deductible? Is there any way I can find out which U.K. organization is the recipient of this grant?  

You raise some interesting questions but things may not be nearly as sinister as you suggest.  First, U.S. charities that make gifts to foreign organizations are not required to identify the recipients on the Schedule F to the Form 990.  They have to say how much is given and the specific purpose, but not the name of the recipient.  In fact, they are specifically advised by the instructions to leave the name blank on the Form.  This was the result of a compromise when the revised Form 990 was first released.  Many U.S. donors to foreign charities were concerned for the safety of the foreign organization workers if their identities were revealed.  It may not be much of a worry for a British organization, but definitely was for controversial organizations in other countries in the midst of civil upheaval.

It is possible that the gifts to the U.S. organization could be considered earmarked and that the organization is not exercising control and discretion, but this sounds like the basic program of all sorts of “friends of” foreign organizations.  Since U.S. taxpayers may not deduct gifts to charities abroad, many of the foreign organizations, particularly foreign hospitals and universities, have created U.S. “friends of” organizations to raise money here and funnel it abroad.  It is all perfectly legal and traditional so long as certain procedures are followed.

If you know who created the U.S. organization and want to know if that is the group getting the contributions, you might find out from a computer search on both of them.  Or, more simply, you could just ask them.  They are not required to tell you, but they may be willing to do so in the hope that you will support the program.  There are probably a whole lot of donors who are giving for that very purpose.

Tuesday, March 21, 2017

Add new comment

Sign-up for our weekly Q&A; get a free report on electioneering