The Charitable Deduction Games: Are the Laws in Your Favor?

Abstract

The article considers why the United States only grants a deduction for charitable contributions made to US charities from a historic standpoint and why doing so is problematic in the fight against global ills. The Charitable Deduction Games examines an alternative approach to cross-border giving that is currently spreading throughout the European Union (“EU”) as a result of the 2009 landmark case Hein Persche v. Finanzamt Ludenscheid. After an examination of Persche, the article explores the UK model that has resulted in response to the decision and considers why the US should adopt a similar model. Next, the article considers why the Netherlands has been reluctant to adopt a similar model in light of its historic stance. Finally, The Charitable Deduction Games examines the responses of various EU Member States to Persche and concludes with a proposal of how Persche should affect US laws governing cross-border giving.  Associate Professor of Law, Pepperdine University School of Law, J.D. cum laude, Harvard Law School, 2003; A.B. Harvard College, magna cum laude. 70 COLUMBIA JOURNAL OF TAX LAW [Vol.5:69 INTRODUCTION 71 I. THE NOTION OF TERRITORIALITY: DEFINED, HISTORICALLY EXAMINED, AND FOUND WANTING 72 US – Current Notion of Territoriality 72 US – History of the Notion of Territoriality 73 1. Implementation as Justification 76 2. Inconsistency with Other Charitable Giving Provisions 77 a. Estate Tax and Gift Tax Deduction 77 b. Donations by Non-Charitable Domestic Trusts 77 c. Treaties in Force 78 d. Treaties Not in Force 79 II. WHY THE NOTION OF TERRITORIALITY IS PROBLEMATIC 80 Practical Standpoint 80 Ideological Standpoint 82 Implementation Issues 83 1. Looking to Prior Solutions 84 2. IRS Approved Lists 85 III. EUROPEAN MODEL 86 Persche – The Impetus for Change in the UK & other EU Member States .........86 Drawbacks of Persche 89 I.V. UK MODEL NEW NOTIONS IN LIGHT OF PERSCHE 90 UK History of Territoriality 90 Current UK Law 91 If the UK Did it, the US Should 93 V. THE NETHERLANDS – STARTING EARLY BUT FINISHING LATE IN THE CROSS-BORDER GAME 94 Current Law in the Netherlands 94 Request for Change 95 Historical Reasons for the Notion in the Netherlands 96 Falling Behind the Giving Times 97 VI. WAKE AFTER PERSCHE WITHIN THE EU 97 CONCLUSION 98 2013] THE CHARITABLE DEDUCTION GAMES: 71 ARE THE LAWS IN YOUR FAVOR?