Nonprofit Organizations Law and Policy Third Edition - Libraries ...

62 OVERVIEW OF THE NONPROFIT SECTOR eH.l
purpose of being turned over to the foreign organization are held to be
nondeductible.
On the other hand, contributions received by the domestic organization
described in the fourth example will not be earmarked in any
manner, and use of such contributions will be subject to control by the
domestic organization. Consequently, the domestic organization is considered
to be the recipient of such contributions for purposes of applying
section 170(c) of the Code. Similarly, the domestic organization described
in the fifth example is considered to be the real beneficiary of contributions
it receives for transmission to the foreign organization. Since the
foreign organization is merely an administrative arm of the domestic
organization, the fact that contributions are ultimately paid over to the
foreign organization does not require a conclusion that the domestic
organization is not the real recipient of those contributions. Accordingly,
contributions by individuals to the domestic organizations described in the
fourth and fifth examples are considered to be deductible.
* * *
REVENUE RULING 66-79
1966-1 C.B. 48
Contributions to a domestic charity described in section 170(c)(2) of
the Internal Revenue Code of 1954 which are solicited for a specific project
of a foreign charitable organization are deductible under section 170 of the
Code where the domestic charity has reviewed and approved the project as
being in furtherance of its own exempt purposes and has control and
discretion as to the use of the contributions. Revenue Ruling 63-252, C.B.
1963-2, 101, amplified.
The Internal Revenue Service has been requested to clarify Revenue
Ruling 63-252, C.B. 1963-2, 101 with respect to the deductibility of
contributions to a domestic charitable corporation which may solicit
contributions for a specific project of a foreign charity in the manner
presented below.
X corporation is a domestic charitable organization formed under the
nonprofit laws of the state of Y. It is exempt from Federal income tax as
being organized and operated exclusively for charitable, educational, and
scientific purposes described in section 501(c)(3) of the Internal Revenue
Code of 1954. Contributions to it are deductible since it is an organization
described in section 170(c)(2) of the Code.
The corporation's charter provides, in part, that in furtherance of its
educational, scientific, and charitable purposes it shall have the power to
receive and allocate contributions, within the discretion of the board of
directors, to any organization organized and operated exclusively for
charitable or educational purposes within the meaning of section 501(c)(3)
of the Code.