Academic journal article Journal of Legal, Ethical and Regulatory Issues

Charitable Contributions Deduction-Elevating Congressional Intent

Academic journal article Journal of Legal, Ethical and Regulatory Issues

Charitable Contributions Deduction-Elevating Congressional Intent

Article excerpt


The Supreme Court stated that a tax deduction "... is a matter of legislative grace and that the burden of clearly showing the right to the claimed deduction is on the taxpayer" (Interstate Transit Lines v. IRS, 1943). This famous tax statement, seemingly "held in awe" is quoted in over 1,000 court cases (Lowry, et al., p 389) and seems to create the statutory presumption of required legal proof and evidence against the taxpayer.

Numerous tax research articles seek to provide clarity when tax law creates a tax-interpretation ambiguity. Some differences of opinions have recently arose about allowed charitable contributions. These tax-deduction ambiguities, and the related efforts to provide clarity, can be found in some recent articles, such as, charitable deductions for taxpayers contributing to nonprofit organizations (Elson & Weld, 2011); how to structure charitable bequests for decedents (Hoyt, 2015); or disallowed charitable contributions given to a foreign church (No Charitable Deduction, 2010).

In the Church of Jesus Christ of Latter-day Saints, as well as many other churches and other charitable organizations, persons provide full-time service without compensation in furthering their organization's tax-exempt objectives. In that church, it is common for retired couples to be called to serve 18-month missions at locations far from their homes. The call comes from church headquarters in Salt Lake City, Utah and not from the local ward (the name used to describe their local church subdivisions within the greater church). The call usually comes in the form of a mailed packet of information with a specific call letter from the First Presidency of the Church of Jesus Christ of Latter-day Saints, as well as other informative materials. The letter informs the missionary couple of the location they are to serve, any language requirements, other preliminary preparation instructions, and the start date of their expected 18 months of service. At the end of the 18 month mission experience, the couple returns home.

Some missionaries are called to serve domestically and others in foreign countries. But the missionaries are called, directed, and controlled by the church headquarters in the United States which is an IRC Section 501(c)(3) organization. IRC Section 170(c)(2) defines "charitable contribution" as a contribution or gift "to or for the use of' an organization "created or organized in the United States ... or under the law of the United States" (Anonymous v. CIR, 2010).

So this case, couple missionaries, is distinguishable from the case of Anonymous v. C.I.R. (2010), where the taxpayer was denied a charitable deduction for air fare to fly to a foreign country to serve a Catholic Church in that foreign country since she was not controlled by a church created or organized in the United States. Her local U.S. diocese knew she was going to that foreign country to serve the foreign church, but it did not direct or control her activities they were all self-initiated by her.

The fact that the charitable work did not take place within the United States was not the important factor since the foregoing Tax Court case recognized the fact that the 5th Circuit Court of Appeals (Winn v. Commissioner, 1979) allowed a charitable deduction that ended up being used in a foreign country. The key factor in that case was the fact that the donation was made to a church organized in the United States and used by it to further its work in a foreign country.

The vast majority of missionary couples keep their homes and return to them when their missionary service is finished. When they leave on their missions, the church leaders in the their local wards release them from their local church responsibilities and fully expect them to return after their missionary service is finished to again take on local church responsibilities. Effectively, they are given a leave of absence regarding their local church responsibilities. …

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