Be Mindful of Laws on Giving Abroad

To the Editor:

Small foundations should be aware that there are legal is- sues involved with making grants abroad (“Giving Abroad,” January 15). If the grant is to a foreign organization, care must be taken to insure that the grant is a “qualifying distribution” if the foundation expects to count it as part of its annual required distribution and not as a taxable expenditure. This generally requires a determination, following the procedures set out in the tax regulations, that the recipient would qualify as a “public charity” if it were a U.S. organiza tion.

Foundations, and other charitable organizations as well, should advise individual donors that the income-tax deductibility of their contributions depends on their not being “earmarked” for use abroad and that the board of directors of the organization must have the discretion to set its own pro grams for donations abroad and may not act as a mere conduit for foreign grants. In addition, corporate donors may only deduct contributions which are used abroad if they are made to U.S. tax- exempt corporations and not those made to foundations which are trusts.

In addition to the requirements imposed by the Internal Revenue Code, it appears that recently proposed regulations by the Financial Crimes Enforcement Network of the U.S. Treasury Department may impose reporting and registration requirements under the money-laundering laws on organizations which make contributions abroad of as little as $750. These regulations are not yet final and their interpretation is still not clear, but it is not unlikely that charitable organizations will be brought under the currency-transactions laws.

Compliance with the established and proposed tax and Treasury rules imposes additional administrative burdens on foundations which wish to spend money abroad, but most of them find it worthwhile if they have endorsed the project.

M. Antoinette Thomas
Carter, Ledyard & Milburn
New York