By: Verena Meiser, J.D. — Partner
Of all charitable donations made by Americans, only about four percent (4 %) go to good causes outside of the United States. If you have a desire to make a difference abroad with an international charitable donation, there are a number of ways you can do so and still get a charitable deduction for income or estate tax purposes.
If your wish to make a general gift to alleviate hunger, support women, help after natural disasters, contribute to development, or support any other general category of need, consider donating to a U.S. charity that provides aid internationally. Among these are Oxfam America (www.oxfamamerica.org), Global Fund for Women (www.globalfundforwomen.org), The Global Exchange (www.globalexchange.org), International Development Exchange (www.idex.org), Development Gap (www.developmentgap.org), Funding Exchange National Grants Program (fex.org), American Red Cross (www.redcross.org) and Grassroots International (www.grassrootsonline.org). These organizations’ websites provide extensive information about their programs around the world. All of these are well-known and trustworthy organizations, but if you contribute to an organization that is not on the list above, make sure it has the 501(c)(3) designation, so that your contribution is tax-deductible.
If you desire a current tax deduction at this time, but are not ready to choose a charity, you may consider setting up a donor advised fund through a national charitable fund, such as Schwab Charitable (www.schwabcharitable.org), the Calvert Foundation (www.calvertfoundation.org), or other such funds offered through investment companies. You could set aside securities and cash now to achieve your tax planning goals and invest the funds until such time that you are ready to designate a charitable beneficiary. Most donor advised funds require a minimum contribution of $5,000.
When you are ready to distribute from your donor advised fund, there are two ways to identify charitable beneficiaries. One way is to find a U.S.-based charity that provides services abroad, for example, such as Doctors Without Borders (www.doctorswithoutborders.org), which provides emergency medical services abroad; the American India Foundation (aif.org), which works on social and economic change in India; or the Grameen Foundation USA (www.grameenfoundation.org), which gives micro loans in many countries. Another way is to use an intermediary organization that provides tools to search for legitimate and effective charities in other countries for a small fee. Among such organizations are Give to Asia (www.give2asia.org), which supports a variety of causes throughout Asia; or Rockefeller Philanthropy Advisers (www.rockpa.org), which works in remote areas of the world. These organizations’ websites contain impressive planning tools and are worth checking out. Anyone who wants to set up a new charitable organization that qualifies for 501(c)(3) status and operates abroad needs to consult with an attorney with experience in establishing nonprofit organizations. It is important to understand that U.S. tax policy allows for a charitable deduction, since the government expects to offset the loss of tax revenues by reduced demands on government funds by social programs that benefit from those charitable donations. Gifts and donations to support foreign charitable organizations or international organizations don’t have that impact within the United States, so the income tax deduction is more difficult to get. The attorney will assist you in determining if a tax treaty exists with the country where you intend to use the charitable donations. Such treaties determine when the participating countries will recognize each other’s charitable organizations as such and when their citizens can deduct donations to charitable organization in the other county. Best known are the treaties between the U.S. and Mexico, Israel and Canada for income tax deductibility, and those between the U.S. and Canada, Germany and the Netherlands for the reciprocal recognition of charitable organizations. The process of establishing a charity that operates abroad or is located abroad requires careful compliance with Treasury regulations.
In summary, there are ample choices for making general gifts to international causes through established U.S. charities. There is also the option of making targeted grants with the help of planning tools offered by intermediary organizations. And finally, there is the option of establishing a new charity with the advice of your attorney. As always, the joy is in the giving, whether with a domestic or an international charitable donation.