Gifts to Domestic Organizations for Foreign Use

Gifts must be made to recognized U.S. charities, including ministries, to qualify for an income tax deduction. There are some acceptable situations where a U.S. ministry may receive gifts for which a deduction is allowed with the money used abroad:

  • The money may be used by the U.S. ministry directly for projects that it selects to carry out its own exempt purposes. In this instance, the domestic ministry would generally have operations in one or more foreign countries functioning directly under the U.S. entity. The responsibility of the U.S. ministry ends when the purpose of the gift is fulfilled. A system of narrative and financial reports is necessary to document what was accomplished by the gift.
  • A ministry may create a subsidiary ministry in a foreign country to facilitate its exempt operations there, with certain funds transmitted directly to the subsidiary. In this instance, the foreign ministry is merely an administrative arm of the U.S. ministry, with the U.S. ministry considered the real recipient of the contributions. The responsibility of the U.S. ministry ends when the purpose of the gift is fulfilled by the foreign subsidiary.
  • A ministry may make grants to ministries in a foreign country in furtherance of its exempt purposes, following review and approval of the uses to which the funds are to be applied. The responsibility of the U.S. ministry ends when the purpose of the gift is fulfilled by the foreign ministry. A narrative and financial report from the foreign ministry will usually be necessary to document the fulfillment of the gift.
  • A ministry may transfer funds to another domestic entity with the second ministry fulfilling the purpose of the gift. The responsibility of the first entity usually ends when the funds are transferred to the second ministry.

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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