Contents

§ 18.6 INCOME TAX TREATIEScharitable contributions, but only if the organization could qualify in the UnitedStates to receive deductible contributions if it were organized in the UnitedStates. Generally, the amount of these contributions made deductible by thetreaty is limited to the income of the U.S. citizen or resident arising in Canada. 39The percentage limitations applicable to the deductibility of charitable contributions40 apply after the limitations established by the treaty. Any amounts treatedas charitable contributions that are in excess of amounts deductible in a tax yearmay generally be carried over and deducted in subsequent tax years. 41The income tax treaty between the United States and Mexico 42 has similarrules as to deductibility of charitable contributions. This treaty also containsrules by which charitable organizations in Mexico can be recognized, for U.S.law purposes (including charitable giving), as public charities. 43 The U.S.Department of the Treasury’s technical explanation of the treaty includes the followingstatement: “The provisions [of the treaty] were considered a desirableway to encourage contributions by U.S. residents to small Mexican charities thatwould have difficulty in organizing a U.S. entity through which contributionscould be directed.” This explanation added that the treaty “also enables taxpayersliving and operating at the border to support organizations across the borderfrom which they derive benefits,” and observed that the “physical proximity ofMexico and the United States provides a unique circumstance for the reciprocalrecognition of tax-exempt organizations.” 44The United States Senate Committee on Foreign Relations Report of May 21,1984, on the Tax Convention and Proposed Protocols with Canada, stated:The Committee recognizes that the special relationship between the UnitedStates and Canada may arguably warrant the treaty’s expanded allowance ofdeductions for contributions to charities of the other country. . . . However,the Committee remains deeply concerned about the granting of deductions toU.S. persons by treaty where the [United States Internal Revenue] Code doesnot otherwise grant the deductions. . . . The Committee does not believe thattreaties are a proper forum for providing deductions not otherwise permittedunder domestic law. . . . The Committee wishes to stress that the inclusion ofspecial charitable and convention expense deduction rules in the proposedtreaty should not be taken as precedent for future treaty negotiations.39 In the case of contributions to a college or university at which the U.S. citizen or resident or a member of hisor her family is or was enrolled, the limitation to income arising in Canada is not required.40 See Chapter 7.41 These aspects of the income tax treaty with Canada are in Article XXI of the Convention.42 Convention and Protocol Between the Government of the U.S. and the Government of the United MexicanStates for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes onIncome, effective as of January 1, 1994.43 See § 3.4(a).44 These aspects of the income tax treaty with Mexico are in Article 22 of the Convention. The rules as to “organizinga U.S. entity through which contributions could be directed” are summarized in § 30.2(d) of Tax-ExemptOrganizations. 557