The Tax Law of Charitable Giving. Bruce R. Hopkins

charitable contributions.¹⁰⁵

      Other instances in which a payment to a charitable organization was regarded as other than a gift include:

       Transfer of securities to a church in trust to provide for perpetual care of the transferor's plot in the church's cemetery¹⁰⁶

       Payments to a church for the rental of a hall for the payors' child's wedding¹⁰⁷

       Payments to a charitable organization that operated an adoption agency in exchange for adoption services¹⁰⁸

       Payments to a temple for a bar mitzvah¹⁰⁹

       Payments to a museum for lectures, concerts, and exhibitions¹¹⁰

       Payments to a rabbi in connection with the payor's divorce¹¹¹

       Expenses of driving children to Girl Scouts functions, because the payor's own children were the principal beneficiaries of the transportation¹¹²

       Payments to a school for books and graduation announcements¹¹³

       Contribution of property that remained subject to the “donor's” unrestricted use and control¹¹⁴

       Payments to a charitable organization when the donor maintained control over the funds transferred, which went toward personal uses such as subscriptions, dues, and training courses¹¹⁵

       Payments to a charitable organization for tickets to a benefit concert¹¹⁶

       Payments to a charitable organization in exchange for food and drink¹¹⁷

       Ostensible transfer and reconveyance of land between a partnership and a church that was, in general, held to lack economic substance; the transaction constituted a purchase rather than a gift¹¹⁸

       Payments by parents to a charitable organization that paid their children's tuition; the payors were not allowed to deduct as charitable contributions the amounts paid to the organization in excess of the tuition payments¹¹⁹

       Payment by individuals to a charitable organization that operated a retirement community, because payment obligated the organization to build a cottage for them¹²⁰

       Payments by a minister to his church (held to be his alter ego), inasmuch as he retained control over the money and property involved¹²¹

       Payment made pursuant to a plea-bargain agreement, which was found to amount to consideration enabling the “donor” to escape incarceration¹²²

       Grant of a conservation easement to a county, which was part of a quid pro quo to cause the county commissioners to grant the “donor's” request for a subdivision exemption, which he needed to develop the property¹²³

       Grant of a conservation easement to a county, which was part of a quid pro quo transaction, because the transferor of the easement, a real estate developer, expected a substantial benefit in the form of an increase in value of the surrounding residential lots by reason of use of the eased property as a park¹²⁴

       Dedication of real property to a city, which was part of a quid pro quo transaction to cause the city to approve a planned community development plan, with the expectation of a subsequent plan approval¹²⁵

On rare occasions, a donor will prevail in a quid pro quo contribution case. This occurred, for example, where a court rejected the government's contention that a real estate developer transferred real property to a town as inducements for a zoning board's approval of projects. The court declined to find the existence of a verbal, unenforceable agreement between the parties.¹²⁶

In a peculiar set of circumstances, a court held that an individual was not entitled to any charitable deduction for a gift of property made by a company he owned because the company had the right to transfer the property to another charity.¹²⁷ The charity this donor wanted to be the donee did not have its tax exemption recognized, so he agreed that the gift would be made to another charity, the charitable status of which was recognized. The court ruled that this restriction on transferability afforded the company a “substantial—indeed paramount—element of dominion and control over the subject of the purported gift, exercisable against [the second charity], after the transfer of legal title to it.”¹²⁸ (As it turned out, this condition was disregarded, with the property promptly transferred from one charity to the other.¹²⁹)

The quid pro quo law in the charitable contribution context gained national attention when the Department of the Treasury and the IRS used it to combat the efforts in some states to circumvent the $10,000 limit on the deductibility of state and local taxes¹³⁰ by substituting an increased charitable deduction for a disallowed state and local tax deduction. Proposed regulations were issued providing rules stating the lack of availability of federal income tax charitable contributions deductions when a transfer of money or other property is made pursuant to one of these SALT cap “workarounds.”¹³¹ These regulations were subsequently issued in final form.¹³²

The general rule, under these regulations, is that when a taxpayer receives or expects to receive a state or local tax credit in return for a payment to a charitable organization, the receipt of the tax benefit constitutes a quid pro quo that may preclude a full charitable deduction. That is, the amount otherwise deductible as a charitable contribution generally must be reduced by the amount of the state or local tax credit received or expected to be received.¹³³ Nonetheless, a taxpayer may disregard a state or local tax credit if the credit does not exceed 15 percent of the taxpayer's payment or 15 percent of the fair market value of the property transferred by the taxpayer.¹³⁴ (This quid pro quo principle does not apply in instances of dollar-for-dollar state or local tax deductions.