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Transatlantic Gifts

Legal Counsel for Philanthropy and the Nonprofit Sector

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Transatlantic Gifts


This article, by Ken Hoffman, originally appeared in Third Sector on May 28, 1998.

Has your charity come across this problem? The chairman says 'we have a donor prospect in America who wants to make a big gift. They won't do it without tax advantage. Make it happen.'

If Mr. Big Bucks is an American taxpayer and wants to make a personal gift - not through a foundation or trust - there are three main choices. Each provides the requisite tax advantage, but are very different in other respects. Often, the easiest choice is to find a US charity that works in a field related to your own. They accept the contribution and then make a grant to your charity. This assumes their corporate purposes are similar to your own and they have no internal rules against activity outside the US.

An easy solution, but is it best? The US charity retains the right to use the funds as it sees fit. Your charity's identity is diminished as the cheque is written to someone else. And the favour is rarely for free - you must expect 1-5 percent of the gift to be taken. Still, this is negotiable and I have known it done gratis.

A second choice is to work with a US charity which exists to encourage giving outside the US. Two of the best known are British Schools and Universities Foundation (www.bsuf.org), a largely volunteer group, and CAF America (www.cafonline.org), a professionally staffed offshoot of that well known UK institution. In these cases you get existing structures and procedures.

But again, the name on Mr. Bucks' cheque isn't your charity's name. And the most Mr. Bucks can do is 'suggest' a parallel donation be made to your institution. Anticipate costs in the 5 per cent range, though this is negotiable.

'Not for us', you say. 'We want our own American Friends group.' True, it provides tax advantage, focuses the loyalty of donors, and builds on the commitment of the board volunteers. But do you have the activity to justify creating a permanent entity? Do you have the American volunteers to begin and sustain it? And who will pay to start it up?

Starting an American Friends group could cost £1,800 to £6,000. You gain a perpetual administrative burden, much like the one your own charity endures. But you still have no guarantee of receiving the money! Even your very own American Friends will have to vote to give money to you.

What all three routes have in common is the absence of certainty. US charity law requires charities to maintain independent control over funds they receive. So a formally restricted gift creates problems. The better choice is for a donor to 'suggest' the use of a gift.

Corporate and charity culture in the UK values certainty in transactions. Moving donations from the US to the UK, because of US law, may not offer the assurance you require. But it is happening all the time.

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