Chapter 16 - § 16.2 • ELIGIBLE DONEES

• Jurisdiction: Colorado

§ 16.2 • ELIGIBLE DONEES

None of the federal tax benefits associated with a charitable gift will be available to a donor unless the gift is made to an eligible donee. Section 170 of the Internal Revenue Code (I.R.C. or Code) describes five different categories of eligible donees for income tax purposes, which are discussed in this section.

NOTE: While somewhat outside the scope of this chapter, I.R.C. §§ 2522(a) and 2055(a) describe the sorts of organizations to which contributions are deductible for gift and estate tax purposes, respectively. Those sections differ from one another in slight and perhaps subtle ways. For example, contributions to fraternal organizations may be deductible for both gift and estate tax purposes, but I.R.C. § 2055(a)(3) provides that eligible fraternal organizations may not engage in any substantial lobbying or any political campaign activities, while I.R.C. § 2522(a)(3) does not. Similarly, contributions to an employee stock ownership plan may be deductible for estate tax purposes under I.R.C. § 2055(a)(5), but there is no gift tax deduction for lifetime transfers of that nature. The language of I.R.C. §§ 2055(a) and 2522(a) also differs in significant ways from that of I.R.C. § 170(c), and the language of all three differs from that of I.R.C. § 501(c)(3). Therefore, it is necessary to study closely the particular Code section that governs the specific type of deduction sought, and, under certain circumstances, it can be risky to assume that a gift to the same organization is necessarily deductible for both income and estate or gift tax purposes.

§ 16.2.1—Charitable Entities

The first category of eligible donees is by far the largest and relates to what are commonly referred to as charities. Charities to which contributions deductible for federal income tax purposes may be made are described in I.R.C. § 170(c)(2). Curiously, I.R.C. § 170(c)(2) does not contain a cross-reference to I.R.C. § 501(c)(3), which is the provision that exempts certain charitable organizations from paying federal income taxes, and while the two sections are quite similar, they are not identical. For example, I.R.C. § 501(c)(3) exempts organizations organized and operated for the purpose of "testing for public safety"; that phrase is omitted from I.R.C. § 170(c)(2). Thus, there is a remote possibility that a contribution to a domestic organization that is in fact tax-exempt under I.R.C. § 501(c)(3) may not be deductible under I.R.C. § 170(c)(2).

The IRS maintains a list of charities described in I.R.C. § 170(c)(2), which has traditionally been known as "Publication 78" and is now available online only at www.irs.gov/charities-non-Profits/exempt-organizations-select-check. For guidance on the extent to which donors may rely on this listing, see...