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INTERNATIONAL GIVING BY CORPORATIONSare required for purposes of this computation. 4 A corporate charitable contributionmay be used for overseas purposes if it is made to an organization that isincorporated under American laws and qualified as a charitable entity. In contrast,a gift to an unincorporated trust, chest, fund, or foundation is deductibleonly if it is to be used within the United States or its possessions. 5 A corporatecontribution that is made directly to a tax-exempt organization established underthe laws of any foreign country, even if the recipient has charitable status underU.S. law, does not qualify for a charitable deduction.Because organizations such as the American National Red Cross, the UnitedWay, and the Salvation Army were established and incorporated in the UnitedStates, they are frequently used by corporations for facilitating foreign givingobjectives. Overseas giving achieved through the mechanism of support of U.S.organizations with charitable status raises no legal or procedural questions notalready contemplated in a domestic giving program.Another category of international agencies that is useful for this purpose arethe private voluntary organizations, which receive their principal support from theU.S. Agency for International Development. Agencies such as CARE, Save theChildren Fund, American Friends Service Committee, Overseas Education Fund,and the Population Council are private voluntary organizations. Typically, theseagencies address large problems in developing countries, such as disaster reliefand food aid. Because they are qualified as tax-exempt charitable organizationsunder U.S. law, they are able to receive charitable donations to be applied to theirforeign charitable activities.§ 20.2 GIFTS OF MONEY FROM FOREIGN AFFILIATEOF U.S. PARENT TO OVERSEAS CHARITYAn American corporation can make contributions to foreign charitable (and/orgovernmental) organizations directly through one or more of its foreign subsidiaries.The company’s ability to obtain a tax deduction for the gift depends onthe tax laws of the country involved, as well as the company’s position withrespect to computation of the U.S. foreign tax credit. 6In general, corporations may elect to claim a credit against U.S. tax liabilityfor certain foreign taxes they incur. This foreign tax credit is limited to theamount of U.S. tax otherwise payable on foreign-source taxable income. Thus,the foreign tax credit is not available against U.S. tax on U.S.-source taxable4 IRC § 170(b)(2)(A)–(D). See §§ 7.18, 7.19.5 IRC § 170(c)(2); Rev. Rul. 69-80, 1969-1 C.B. 65. This limitation as to gifts by corporations does not applyin the case of charitable gifts by small business (S) corporations, which are the subject of IRC §§ 1361–1368.Priv. Ltr. Rul. 9703028. The taxable income of an S corporation is generally computed in the same manneras for an individual. IRC § 1363(b)(2). One of the exceptions to this rule is that certain deductions (thosereferenced in IRC § 703(a)(2)) are not allowed to these corporations; among these deductions is the one forcharitable gifts. In determining the tax of a shareholder of an S corporation, each shareholder takes into accountthe shareholder’s pro rata share of the corporation’s items of income, loss, deduction, or credit, theseparate treatment of which could affect the liability for tax of any shareholder. IRC § 1366(a)(1)(A). Theseitems include charitable contributions. IRC § 702(a)(4). Thus, charitable contributions by S corporations arepassed through to the shareholders and are subject to the limitations on deductibility that apply to individuals,not to corporations.6 IRC § 27. 568