Legal Guidelines for Providing Disaster Relief

Options for Giving

Giving to U.S.Public Charities

Awarding grants to U.S.-based public charities targeted for tsunami relief does not present any special challenges. Specifically, grants from corporate giving programs are eligible as charitable deductions similar to other grants to Section 501(c)(3) public charities. Grants from company-sponsored private foundations will count as qualifying distributions. Both corporate gifts and corporate foundation grants may be given with the understanding that they will be used for the international activities of the U.S.-based charity, including its activities in a single country. A listing of some public charities working in the affected region is available at http://www.usig.org/tsunami.asp.

Giving Directly to Non-U.S. Organizations

Grants from a corporate giving program to a non-U.S. organization will not be eligible for a charitable deduction but, if made by a foreign subsidiary, may be deductible under the foreign country's tax laws. A company-sponsored private foundation may make grants to non-U.S. organizations so long as the foundation follows either the equivalency determination or the expenditure responsibility rules required for international grantmaking. More information on these rules is available at www.usig.org.

Matching Gifts

Corporate giving programs and/or company-sponsored private foundations may match gifts made by U.S. or internationally-based employees targeted for tsunami relief in accordance with the rules of the entity's matching gift program. If the rules of the matching gift program permit the matching of donations to organizations other than U.S.-based 501(c)(3) public charities, grants to internationally-based organizations may be made in accordance with the rules mentioned above.

Assisting Affected Employees

The rules for assisting employees in a disaster vary depending on whether the disaster has been classified as a "qualified disaster" by the Secretary of the Treasury. The earthquake and tsunami have not yet been designated as such. Therefore, while corporations may assist affected employees, payments to employees will be considered taxable compensation to the employee.Company-sponsored private foundations may not assist affected company employees because the grant to an employee may not be considered charitable and may violate the prohibition against self-dealing.

The Council on Foundations has requested that Treasury Secretary Snow declare the earthquake and tsunami a "qualified disaster." (http://www.cof.org/files/Documents/Legal/Council_letter_to_Treasury_re_Tsunami.pdf ) If Secretary Snow makes such as designation, a company-sponsored private foundation will be permitted to make disaster relief distributions to employees and their families as long as the class of beneficiaries is large or indefinite, the recipients are selected based on an objective determination of need by an independent selection committee (or by other substitute procedures to ensure that any benefit to the employer is incidental and tenuous). More details about grants to employees affected by a qualified disaster are available in "Disaster Relief: Providing Assistance Through Charitable Organizations." http://www.irs.gov/pub/irs-pdf/p3833.pdf .

Additionally, if the tsunami is designated as a qualified disaster, corporations could pay or reimburse affected employees or their family members for personal, family and living expenses incurred in connection without the payments constituting taxable income to the employees under U.S. law. Presumably the payments by the corporation under these circumstances would also be deductible by the corporation as a business expense as well.