CHARITABLE ALLOCATION RULES MEET SOME CONGRESSIONAL OPPOSITION.

The members urge Treasury "to permit full allocation of charitable donations to qualified U.S. based nonprofits to domestic source income, in order to comply with the Congressional intent and to foster sound policy in the arena of charitable giving."

As ones who support private charitable activity abroad we wish to express our opposition to the Internal Revenue Service's proposed regulation affecting the allocation of charitable deductions, and to encourage the adoption of allocation rules advocated by the Fund for Private Assistance in International Development (PAID), on behalf of a broad based coalition of over seventy nonprofit organizations and in comments filed by the Independent Sector and the Council on Foundations, both of which are major umbrella organizations representing a wide range of private, voluntary organizations.

Their position would permit allocation of all charitable donation deductions to domestic source income where such donations meet the statutory test laid out in Section 170(c) regarding deductibility.

Under the tightly controlled circumstances of giving set forth pursuant to section 170, and taking into account the full regulatory authority of the IRS to exercise oversight over qualified nonprofit organizations, we believe that permitting allocation against domestic source income is firmly grounded in the tax code and in sound public policy.

The public policy is clear and compelling. The Federal Government does not have the financial resources to meet all the human, economic, environmental and other needs facing our own society, let alone all the needs of other nations. Therefore, we must rely on the private voluntary sector. In particular, we want to support the private voluntary sector in the international context where the needs are so great and official resources are so limited. We hope that you agree that this point in history is a singularly inappropriate moment to take any action which would undercut the vital work of non-profit organizations active in addressing problems throughout the world.

There are many activities that could be jeopardized by the proposed regulation. At this very moment there are missions under way for assisting Kurdish refugees, feeding children in Africa, assisting cyclone victims in Bangladesh, and preserving the global environment through the protection of tropical rain forests.

The alternative proposed to the Service by the nonprofit sector and supported by us would not harm such crucial international efforts and at the same time would not operate to discourage charitabIe donations for purposes that are solely and clearly domestic in nature.

There is nothing in the Code or in the Congressional intent which provides a basis for allocating and discriminating among nonprofit organizations with identical legal and tax status simply on the nature or geographical focus of their work. Such discrimination is exactly what the proposed allocation rule would endorse, and that is why we oppose the proposed regulation.

Legislatively, the history of section 170(c) reflects the Congressional judgment that charitable donations to all duly qualified domestically based nonprofits are to be encouraged. In the same context a statutory bright line was drawn by Congress in refusing to extend such support to charitable donations to nonprofits which are foreign based. While not being hostile to legitimate nondomestic charitable activity, the legislative intent in drawing such a clear line is to insure against abuse of charitable giving by entrusting the Service with complete authority to determine which organizations qualify as donees and to supervise those organizations to see that they remain legitimately tax exempt and eligible to receive tax deductible contributions.

It is entirely consistent to permit allocation to domestic source income of all those donations and only those donations which meet the clear test of of deductibility under section 5170(c). Only Congress has the power to make, and has made, the determination about which organizations and which types of activities are entitled to be encouraged through tax deductible contributions.

We strongly urge you to permit full allocation of charitable donations to qualified U.S. based nonprofits to domestic source income, in order to comply with the Congressional intent and to foster sound policy in the arena of charitable giving.

Sincerely,