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Nonprofit Law/Establishing a Mexican non-profit for a US law school

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Question
Our US law school has an academic affiliation with a Mexican law school.  Can a Mexican non-profit be established to receive tax deductible donations from Mexican citizens and corporations in order to support our mutually affiliated law programs? Can money be transferred between our private foundations without US tax consequences? We have been told that issuing a Mexican tax deduction receipt would increase philanthropic support from Mexican nationals.

Answer
See IRS Publication 526 "Charitable Donations"  which is available at
http://www.irs.gov/pub/irs-pdf/p526.pdf
--- Start of excerpt ---
Under the U.S.-Mexico income tax treaty, a contribution to a Mexican charitable organization may be deductible, but only if and to the extent the contribution would have been treated as a charitable contribution to a public charity created or organized under U.S. law. To deduct your contribution to a Mexican charity, you must have income from sources in Mexico.
--- End of excerpt ---

I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. You are asking about a Mexican nonprofit organization which would be established under the laws of Mexico to receive deductible donations from Mexican citizen, and I do not deal with the laws of Mexico, but I can inform you that, because of that U.S. - Mexico Income tax treaty, there should be reciprocity.  Therefore, the statement in the publication of the Mexican taxing authority to their citizens who are residents of Mexico would be something like:
--- Start of excerpt ---
Under the Mexico - U.S.income tax treaty, a contribution to a U.S. charitable organization may be deductible, but only if and to the extent the contribution would have been treated as a charitable contribution to a public charity created or organized under Mexican law. To deduct your contribution to a U.S. charity, you must have income from sources in the United States.
--- End of excerpt ---

You referred to your organization as a private foundation, but I believe, from what you wrote me directly earlier, it would be a public charity. You can check on the site of the IRS at http://goo.gl/JpDQA and, after putting in your EIN (Employer Identification Number - or Taxpayer Id number) which appears to me to end with 2551, you will get a result which has in the last column "PC" which means "Public Charity" (not a private foundation).

To get an answer relating to the Mexican law you would need to consult with an attorney who is a member of the bar of Mexico and who practices in the area of nonprofit tax exemption.  I can give you some leads, though.

Your first question was relating to something other than what I dealt with above and the answer may be "yes" if it is also covered by the U.S. - Mexico tax treaty. U.S. law does allow a U.S. exempt organization to fund foreign nonprofit organizations.  However, the solicitations may not name that particular foreign organization. See the IRS publication at http://www.irs.gov/pub/irs-wd/0504031.pdf for details about international grants to and international activities of U.S. exempt organizations, and, especially page 3-4 about grants to foreign organizations starting on page 3 at "Deductibility - Control Rules".

Rev. Rul. 63-252 also provides an example of a domestic charitable organization that furthers its own purposes by granting funds to foreign charitable organizations and makes such grants for purposes
which it (the domestic charitable organization) has reviewed and approved.  The grants are paid from the domestic charitable organization's general funds and are subject to control by the domestic organization.  No special funds are raised by a solicitation on behalf of the foreign organization nor are contributions earmarked in any manner.  In this example, the contributions by individuals to the domestic charitable organizations are considered to be deductible.

If, instead of establishing a Mexican nonprofit, you wish to have Mexican citizens donate directly to your U.S. exempt organization, and you want some more information about that from me, please email me directly again.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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