US Based Expats Seek Tax Breaks For Overseas Donations

by Mike Godfrey, Tax-News.com, Washington

16 November 2001

According to reports, some US based expats and citizens wanting to make donations to overseas charities and causes can now benefit from similar tax deductions to those afforded for domestic donations.

Until now, with the exception of donations to charities in Canada and Mexico, with which the United States has special arrangements, expatriates and Americans who want to support overseas projects personally have been unable to benefit from the same tax benefits afforded for donations to non-profit organisations in the US.

This, along with the difficulties inherent in conducting continuing due diligence on the beneficiary organisation, increased regulatory complications, and since September 11th, law enforcement agency suspicions that some overseas charities act as a front for terrorist groups, has eroded international charitable giving. According to the American Institute of Philanthropy, US taxpayers report that only 1% of their charitable donations are to international causes.

However, this all looks set to change, as several charities and non-profit organisations which manage overseas donations for individuals are sidestepping the limitations on foreign giving in order to allow taxpayers to make donations to the international charity of their choice, while also giving them the benefits of a tax deduction.

Although there are several front-runners in this area, notably the National Philanthropic Trust, the Community Foundation Silicon Valley, and the Asian Foundation, it is the latter which is thought to have launched the nation's first international donor-advised tax effective fund, Give2Asia.

In order to afford the donor a tax break on international gifts, Give2Asia has revealed, it must scale higher hurdles than domestic organisations. Usually, a fund administrator would do no more than verify the tax exempt status of the organisation before issuing a check on the donor's behalf. However, as an international administrator, Give2Asia and other such organisations must go beyond a simple tax check, and must conduct considerable due diligence before sanctioning a distribution.

Give2Asia reported recently that in the two months since the inception of the donor-advised fund, field staff have identified around 1,000 international non-profit organisations which it considers suitable and credible beneficiaries.

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