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INTERNATIONAL GIVING BY INDIVIDUALS DURING LIFETIMEorganization, representing to prospective contributors that the raisedfunds would go to the foreign organization.4. A domestic organization, which conducts a variety of charitable activities ina foreign country, sometimes grants funds to a foreign charitable organizationto further the domestic organization’s purposes. These grants are madefor purposes that the domestic organization has reviewed and approved,and the grants are made from the organization’s general funds rather thanfrom a special fund raised on behalf of the foreign organization.5. A domestic organization that does work in a foreign country forms asubsidiary in that country to facilitate its operation. The subsidiary wasformed for purposes of administrative convenience, and the domesticorganization controls all facets of its operations. The domestic organizationwill solicit funds for the specific purpose of carrying out its charitableactivities in the foreign country, as it did before forming theforeign subsidiary, but will now transmit the funds directly to the foreignsubsidiary. 18A common theme in the first three of these cases is that the organizationsare charitable organizations nominally created in the United States. They areorganized or operated solely to solicit funds on behalf of preexisting foreignentities. The domestic entities are effectively agents or conduit organizations forthe foreign beneficiaries. As such, contributions to them are not deductibleunder U.S. law as charitable gifts. Examples 4 and 5 describe organizations thatsolicit funds without any express understanding that the donations will be forwardedto foreign entities. They are independent organizations with their owncharitable programs. These organizations exercise discretion and control over thefunds solicited from U.S. sources. Consequently, gifts to them are deductible.The IRS’s view is that the real donees in the first, second, and third of these situationsare the foreign organizations; hence, contributions ostensibly to thedomestic organization are not deductible under U.S. law. In contrast, the IRS hasconcluded that contributions to the domestic organizations in the fourth andfifth situations are deductible as charitable gifts because the domestic organizationsin these situations actually received and essentially controlled the use ofthe funds.The seminal IRS ruling on the point ends with the following language,which draws on the principles enunciated in the case law:It is recognized that special earmarking of the use or destination of fundspaid to a qualifying charitable organization may deprive the donor of adeduction . . . [citations omitted]. These cases indicate that an inquiry as tothe deductibility of a contribution need not stop once it is determined that anamount has been paid to a qualifying organization; if the amount is earmarked[,]then it is appropriate to look beyond the fact that the immediaterecipient is a qualifying organization to determine whether the payment constitutesa deductible contribution. Similarly, if an organization is required forother reasons, such as a specific provision in its charter, to turn contributions,or any particular contributions it receives, over to another organization, thenin determining whether such contributions are deductible, it is appropriate to18 Id. 552