Is an IRS-recognized foreign, nonprofit, tax exempt entity that is NOT registered as a 501(c)3 eligible for tax-deductible donations in the US?

[arjdheer]

My organization is based in Germany. It has a Foreign TIN and we are registered with the IRS via form W-8BEN-E. On this form, we are registered as a nonprofit and have filled box 36 in section XXII as a non-profit organization. 

We are very interested in soliciting donations from the USA, but we are not sure if the donations would qualify as tax-deductible. We are not a 501(c)3, but we are registered as a tax-exempt nonprofit with the IRS. Can anyone advise me as to whether the donors could claim the donations as being tax deductible?

[Opus 17]

Probably not.  

I'm not sure how you can be a non-US entity and be registered with the IRS (or what kind of registration it is).  In general, donations are only deductible if the organization is based in the US, or at least has a US branch (like the US Red Cross is a branch of the International Red Cross and Crescent.)  The only exception is that donations to Mexican and Canadian Charities are deductible to the extent that a taxpayer has Mexico or Canada-sourced income.

The exempt organization search tool will tell you (and your donors) if your organization is eligible for a tax deduction in the US. https://www.irs.gov/charities-non-profits/tax-exempt-organization-search

[arjdheer]

Thanks for the info. Well, I believe the form we registered with (W-8BEN-E) is specifically for foreign entities. We do have a TIN with the IRS even though the organization is domiciled in Germany. It's a bit confusing as the organization does not show up in the search at the link you provided even when I enter the EIN... not sure what to do here. We have a lot of potential interested donors based in the USA but they have asked about tax deductibility so this is why I wanted to check. Perhaps best thing to do is to contact the IRS directly.

[Opus 17]

I think you're probably not a deductible organization for US donors.

[TaxGuyBill]

Form W-8BEN-E is not the registration form for a tax-exempt organization.  That is just a form to let others know about your tax-exempt status.

The application form to become a non-501(c)(3) tax-exempt organization is the 20 page Form 1024.  In the event you have not filed that form with the IRS, you are not a non-profit organization (at least for US purposes).

[arjdheer]

Ok fantastic, thank you for the answer, TaxGuyBill. This is what I needed to know. I'll let the administration at my institute know so that we can begin the 1024 filing process. Cheers!

[Opus 17]

I think that should have been form 1023.  In any case, start here. <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p557.pdf">https://www.irs.gov/pub/irs-pdf/p557.pdf</a>

<a rel="nofollow" target="_blank" href="https://www.irs.gov/charities-non-profits/before-applying-for-tax-exempt-status">https://www.irs.gov...>

<a rel="nofollow" target="_blank" href="https://www.irs.gov/charities-non-profits">https://www.irs.gov/charities-non-profits</a>

Note that the instructions for form 1023 <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i1023.pdf">https://www.irs.gov/pub/irs-pdf/i1023.pdf</a> say

"Contributions by U.S. residents to foreign organizations generally aren’t deductible. Tax treaties between the U.S. and certain foreign countries provide specific limited exceptions."


Even if you complete your 503(c)(3) registration (or one of the other types, depending on the nature of your organization) your donors may not be allowed to deduct contributions.  You may want to discuss this with an experienced tax attorney or enrolled agent.

And you will of course need to file an annual tax return to report your US income.  Tax is not owed if you are tax-exempt, except on unrelated business income.

[TaxGuyBill]

Form 1023 is to become a charitable 401(c)(3) organization.


To become another type of tax-exempt organizations it would be Form 1024 or 1024-A.  However, those donations to those types of organizations may not be tax-deductible by the donor.  There is a difference between "charitable (which donations may be deductible) and "tax-exempt".


But as Opus said, in MOST cases being a qualified charitable 401(c)(3) organization will NOT allow the US donors to deduct the contributions if the organization is not US based.


I HIGHLY recommend finding a US tax professional that is experienced with tax-exempt organization for assistance.  Also there is much more than just filing the initial application (there is required accounting and an annual tax return).

[Opus 17]

@TaxGuyBill got an irregular keyboard that's missing a "5"?  (Steven Wright reference) 🙂

[arjdheer]

Thanks all for your help. It seems that indeed we are not able to solicit tax-deductible donations from US citizens given our current standing. I will therefore look into other avenues.