TREASURY RESPONDS TO CONGRESSIONAL CONCERNS ABOUT CHARITABLE ALLOCATION REGS.

Thank you for your letter of July 31, 1991, to Secretary Brady expressing your concern about the March 12, 1991 proposed regulations governing the allocation of deductible charitable contributions between a donor's U.S. and foreign income. Secretary Brady asked me to respond directly to you.

We have no desire to harm the efforts of international relief organizations or to hinder any charitable activity. The Internal Revenue Code, however, requires the allocation and apportionment of deductions between domestic and foreign source income. As a legal matter, we must find a factual relationship between a deduction and a particular stream of income to allocate the deduction there. Otherwise, we must apportion the deduction on some ratable basis among income streams.

We are evaluating the proposed rules on the allocation of charitable deductions in light of the extensive comments we have received. The testimony provided at the public hearing held on August 1 added much useful information.

We are giving careful consideration to your concerns and to those expressed by various charities and others.

Sincerely,