UK: Charities E-Bulletin – Summer 2011

CIVIL SOCIETY: PHILANTHROPY

By Simon Weil

Introduction

One year in to its tenure and the Conservative/Lib-Dem coalition government is beginning to bring some shape to its Big Society concept, aiming to stimulate social action with the introduction of a White Paper policy on philanthropic giving and sowing the seeds of financial incentives for the same in the 2011 Budget. This bulletin provides a roundup of recent legal and budgetary developments affecting the philanthropic sector in the UK and considers how philanthropic giving might be better encouraged. We also take a look at the financial implications the Big Society idea may have for the charitable sector and the loopholes available to European charities enabling them to avoid withholding tax on US investment returns. We are delighted to welcome guest contributions from Martin Brookes, Chief Executive of New Philanthropy Capital (NPC) and Brendan Wilson, attorney at US firm Akin Gump Strauss Hauer & Feld LLP.

PHILANTHROPY: PUTTING YOUR MONEY WHERE YOUR MOUTH IS

By Martin Brookes

Martin Brookes outlines the hard work ahead that must be contributed to by government and the philanthropic sector itself to stimulate further giving in the UK.

Peer pressure can be a good thing. In 2009 Warren Buffett and Bill Gates launched their giving pledge to encourage rich Americans to donate the majority of their wealth to charity. Aimed particularly at billionaires, the pledge tries to get people not just to give, but to talk about their giving, and inspire their peers to follow their example. 59 have signed up so far, including Mark Zuckerberg, Michael Bloomberg, and George Lucas.

There has been talk of starting an equivalent UK pledge to boost giving here—but so far, nothing has materialised. Maybe this is because there are no obvious billionaire philanthropists to start such a pledge in the UK. Perhaps we could adapt the format and entice a group of investment bankers to get a pledge started, targeting a larger group of millionaires rather than a few billionaires. Or is this kind of initiative better left to our cousins across the pond?

A UK giving pledge is one of the suggestions in NPC's recent report, Ten ways to boost giving. NPC wrote this report in response to the government's Giving Green Paper, which provided a welcome opportunity to discuss the role of philanthropy in society. Given that many charities are currently facing cuts in government funding, and are coming to rely more and more on individual donations, it seems as good a time as any to put the spotlight on the state of giving.

A look at the stats shows that philanthropy in the UK is not healthy. Giving has been stagnant for decades—despite a significant rise in national income, the percentage donated to charity has stayed at around 0.8%. As we have become richer, we have not given away more. And figures show that although average donation size has risen in recent years, the number of households giving to charity is significantly lower, meaning that giving levels are being held up by a shrinking group of donors. Perhaps surprisingly, there is also no correlation between wealth and generosity—the top 10% of households by income donate 1.1% of their total spending, while the bottom 10% donate 3.6%. All this has left the UK facing a giving deficit, much like the government's budget deficit.

So that means we need to work harder to boost levels of giving in the UK. NPC's recommendations for increasing charitable giving can be roughly grouped into three areas: tax incentives, creating a culture of giving, and improving fundraising. Only by working on all three can we expect to see a significant rise in charitable donations.

The government has an important role to play in continuing to make it easy to give by streamlining the tax process. In his recent budget the Chancellor included two items which go some way to do this. First, reducing inheritance tax for those who leave 10% of their estate to charity removes the tax disincentive for people leaving legacies to charities in their will. And second, changing how gift aid is administered makes it easier for charities to claim gift aid on small donations.

These measures aren't going to change our relationship with charity overnight. They are a step in the right direction, but in order to really boost donations we need to build a culture of giving. There's a role here for government, but also for the media, employers and wealth advisors— making people aware of the impact donations can have, promoting workplace giving and offering matched donations, or talking to clients about philanthropy would be a start.

Charities also need to think about the way they interact with donors, and ensure they look after them properly to keep them coming back to donate again. Donors can sometimes feel harangued by charities, and people who have had negative experiences of giving are less likely to donate again. Charities need to invest in looking after their supporters and ensure that giving is a positive and rewarding experience which leaves donors feeling good and keen to come back and donate again.

The UK likes to think of itself as a generous nation, but at the moment the figures just don't add up. We cannot expect the void left by government funding cuts to charities to be filled by personal giving in its current state. Tax reforms can help, but we can do more. If talking about giving, like Buffett and Gates, can inspire others to give more, then isn't it time to put our money where our mouth is?

GOVERNMENT'S WHITE PAPER ON GIVING – A SUMMARY

By Ben Brice

Ben Brice provides an overview of the White Paper, introduced in May 2011, and considers whether it has gone far enough in terms of incentivising giving.

The Government's White Paper on Giving comprises a key part of its 'Big Society' programme. The broader Big Society policy aims to return to the people control of their community and individual social requirements and to reduce their reliance on the state. The Government aims to facilitate this by empowering local communities, opening up public services to competition and encouraging social action and greater giving. Government policy on social action is set forth in the White Paper. Its aim is to 'catalyse a culture shift that makes social action a social norm', it is not intended to be definitive and 'marks the beginning of a process of engagement on giving, not the end of one'.

The good

The White Paper recognises that opportunities to give may be eased by the removal of the bureaucratic red tape which so often restricts it. This is particularly the case in relation to the development of volunteering networks and fundraising activities. The Minister of Civil Society has considered this aspect to be sufficiently important to establish a separate Civil Society Red Tape Task Force under the leadership of Lord Hodgson, whose report was published in May 2011. Various recommendations are made, including law reform, the elimination of regulatory duplication, and the provision of clear, standard guidance. The Cabinet Office will be working with the Better Regulation Executive to address the recommendations and a further update is expected in May 2012.

The White Paper also suggests that greater giving might be encouraged by increased reward and recognition for established givers of time and money. This is achievable both through the honours system and by affording greater publicity to alternative awards. Higher level celebration of those who give will incentivise others to follow in their footsteps and pursue their own rewards. Awareness can also be enhanced by publicising and promoting giving related activities at national and local level.

The encouragement of innovation through the development of new methods of fundraising by social media and other new technologies is to be welcomed. The same is true of the further promotion of payroll giving with a view to its becoming the norm. Matched funding initiatives and increased transparency from the charity sector, so that donors can more easily see how their money is applied, will also promote greater giving.

Overall, better access to information about how to give most efficiently, supported by effective public research across the philanthropic sector, will provide further stimulation to giving across the board.

The bad

There is a fine line between the Government introducing measures that encourage social giving and stepping in to enforce particular behaviour. It is not for Government to manipulate the giving market actively. The Government has therefore, rightly, declined this suggestion in the White Paper (e.g. the Green Paper had suggested that grant giving foundations ought to be obliged to pay out minimum percentages of their income). However, as previously noted, the policy is designed as the first step in a process, and Government intervention may well creep in. For example, the White Paper suggests that organisations ought to be required to demonstrate their social impact (notwithstanding the fact that there is unlikely to be any uniform method of assessment). This would not only be a Government imposed requirement; It would also conflict with the stated policy to reduce red tape.

Transactional giving is advocated in the White Paper as a means of promoting social giving policy, i.e. the giver receives something in return. There is however a danger that, if social giving becomes too transactional, it will cease to be voluntary. Any reciprocity should be incidental rather than a requirement.

The missing

It is widely accepted by professional advisors working within the philanthropy sector that financial breaks are likely to prove a key tool in encouraging giving and unlocking further resources. The Giving Green Paper failed to make any suggestions in this regard. Whilst the White Paper has addressed this point to a certain degree, notably by highlighting the reduction of inheritance tax for estates leaving more than 10% to charity, introduced in the 2011 Budget, it has failed to take the opportunity to make any further, substantive changes.

Incentives may not provide the primary motivation for giving; they would, however, enable those inclined to be generous to give more of their money and more often. In particular, there has been much lobbying recently for 'lifetime legacy' incentives (allowing donors to make an irrevocable gift to charity during their lifetime, but retaining the benefit of the income or use of the gift during their lives) and for income tax relief to be extended to outright gifts of chattels, mirroring the reliefs currently available for gifts of quoted securities and land.

As regards gifts of art, the White Paper suggests that inheritance tax relief should remain available only for 'pre-eminent' works, which sets the bar for assessment too high since too few items would fall within the definition to attract donors in sufficiently significant numbers. A better option would involve applying the tried and tested former 'museum quality' test, involving a lower threshold and therefore a broader scope, leading to greater impact for the sector.

A consolidation of the reliefs that are currently available and some balancing of the inconsistencies that exist in current government policies would also prove useful to potential donors.

Conclusion

The White Paper admits to being unconventional in nature, as it is written from a variety of perspectives and incorporates suggestions for implementing its policy coming from outside government as well as within it. The fact that the Government is seeking to engage with and promote the sector should be welcomed, but the scattergun approach means that it does not quite work as a cohesive whole. Whilst the glaring gaps in relation to tax incentives temper any initial optimism, the flexible interaction between Government and the sector promised in the paper does hold out the potential for positive future developments.

IS THAT ALL THERE IS?

By Nicola Evans

Nicola Evans considers whether the charitable giving reforms announced in this year's Budget are likely to be an effective catalyst to change society's attitude to giving.

In the Budget in March 2011, the Chancellor announced a package of reforms which the government has since described as 'the most radical and generous reforms to charitable giving for more than twenty years'. This is aimed at 'encouraging charitable giving and building a more socially conscious society'. Will the reality match the rhetoric?

Incentivising charitable legacy giving

The Chancellor announced a 'major change to our inheritance tax system', namely that for deaths from 6 April 2012, the inheritance tax rate would be reduced by 10% for estates in which at least 10% of the net estate is left to charity. A consultation on this proposal ('A new incentive for charitable giving') has now been launched, giving further information on how the relief is intended to operate, but also highlighting a number of potential difficulties to be addressed. Not least among these is the problem of how to be sure that the magic 10% amount can be identified for all estates, no matter their complexity. This is by no means straightforward and, at first sight, the proposal looks to run counter to the government's parallel aim of simplifying the tax system.

On the plus side, the consultation recommends that, if the 10% margin has not been reached, the relief can still be obtained through an instrument of variation of an estate, thereby hopefully encouraging charitable giving among the non-charity beneficiaries of an estate.

Potentially the biggest incentive arising from the proposal is not mentioned in the consultation. An effect of the proposal is that a testator who was minded to leave 4% of their net estate to charity could increase this to 10% at no extra cost to the non-charity beneficiaries of the estate. Likewise, the non-charity beneficiaries of an estate leaving 4% of the net estate to charity, could increase this to 10% without diminishing their share (save for the expense of the instrument of variation).

The question remains, however, whether the proposal will lead to new revenue for charities. Any such revenue can be expected to be slow in coming, depending as it must upon the successful administration of estates of those who will have made or changed their wills in light of the proposal (or the estates being varied to trigger the relief). The government estimates that additional revenue for charities could reach £175m by 2015-16, but this seems optimistic. With only 3% of estates paying IHT, any cultural shift in attitudes to giving is, by definition, limited and there is a risk that the overall administrative cost may outweigh any gain for charity. The consultation is open until 31 August.

Gift aid reforms

A package of gift aid reforms was also announced.

A reform which is already in train (in the Finance (No 3) Bill) is the increase, from £500 to £2,500, in the overall cap on the value of benefit which a donor can receive in consequence of making a gift under gift aid. This will allow charities a little more leeway to thank donors making larger gifts under gift aid.

From April 2013, it is proposed that charities will be able to claim 'gift aid style' repayments on up to £5,000 worth of small donations (of £10 or less) per year, without needing gift aid declarations. However, the small print, designed to prevent abuse, means that the repayment would only be available for charities which have been registered for gift aid and operated it successfully for three years with a 'good' compliance record. Some smaller charities may consider the administrative cost of doing this is not worth the potential benefit of the new repayments.

It is hoped, however, that the cost of gift aid administration will be eased with the introduction, due in 2012-13, of a new online system for registering for gift aid and making claims. HMRC is consulting with the sector to develop this system.

Tainted charity donations

The Finance (No 3) Bill introduces new rules to replace the unpopular substantial donors regime, which was considered to be poorly targeted and administratively burdensome for charities.

The new tainted charity donations (TCD) rules seek to address the situation where a supposed 'donor' purports to make a gift to charity, upon which he can claim tax relief, but, rather than a philanthropic motive, the 'gift' is part of an arrangement by which the donor aims to obtain a financial advantage from the charity for himself or for someone connected to him. Where 3 conditions are met under the TCD rules, the donation is 'tainted' and, as a result, the tax relief on the donation is denied, but an innocent charity beneficiary of such donation is unaffected. It will be for donors, not charities, to self-assess under the new rules.

The TCD rules are complicated, but guidance is due to be devised with a working group sitting under auspices of the Charity Tax Forum. The working group can also consider any unintended consequences to be addressed.

Gifts of art and heritage objects

Following a Budget announcement, a further consultation has just been launched on a proposal designed to encourage donations of pre-eminent objects and works of art to the nation. The proposed scheme would be run in tandem with the current IHT acceptance in lieu scheme and be subject to an overall annual limit (of £20m) on the total of tax reductions which may be permitted. In essence, where a gift of a pre-eminent object was accepted under the new scheme, the donor would have their income tax and capital gains tax liability reduced by an amount equivalent to a percentage (25% is proposed) of the agreed valuation of the object. The gift would be made to the nation, rather than a specific charity, and the Government would loan the object to a suitable institution to be put on public display. The consultation runs until 21 September.

Still to come?

It remains unclear whether implementation of tax relief for lifetime legacies may be on the cards. This is a concept long established in the US tax system, for which there is rumoured to be support, but this is absent from the Government's Giving White Paper and the Budget. Is the package of reforms announced in the Budget only the start or is that all there is?

Conclusion

The reforms package has much to commend it but, on closer analysis, it boils down to overdue (but nonetheless welcome) repairs to bits of legislation and processes which were not working well, together with some limited tweaking around the edges. We are already beginning to see that the introduction of some of the proposals stands to add unwanted complexity to an already byzantine tax system for expected benefits which may not materialise.

It is good news that there is clearly good will towards the sector and genuine good intention to make a positive difference. In the current climate, smaller, quicker wins are probably the most the sector can hope for, and perhaps such small steps will yet prove effective in nudging society towards a more giving culture. But if the government wants its reforms to be seen as 'radical' and 'generous', on a par with the introduction of gift aid, it will need to do more.

FUNDING THE BIG SOCIETY

By Jonathan Brinsden

Jonathan Brinsden wonders precisely where the money to fund the Big Society project is intended to come from and takes a look at the various alternative investment initiatives that are being suggested for this purpose.

Whilst the concept of the Big Society has sparked widespread debate and interest amongst the media, policymakers and the general public, it has proved to be remarkably difficult to define. To some it is an ideological smokescreen providing a mandate to those on the right of the political spectrum to roll back the state in reaction to the previous administration's 'Big Government' approach. To others, it represents a fig leaf for the colossal cuts announced as part of the Comprehensive Spending Review (CSR), which may see the government's current £12.8bn contribution to the sector fall by as much as £5bn. The new coalition government, however, would tell us that the purpose of the Big Society is to effect a cultural shift towards community empowerment, civic engagement and a new era of philanthropy. It is perhaps fair to say that, in this post banking crash environment, a genuine appetite exists for a shift in the tectonic plates which divide the markets, state and civil society.

Whilst it feels that we are being bombarded by Big Society policy initiatives, these pale into insignificance in comparison to the implications arising out of the radically changing funding landscape and the enormous stress which this is placing on the sector. The discretionary nature of sector funding has meant that income streams have always been fragile and so it is perhaps important to review what innovations or developments are being proposed to pick up the slack of the CSR cuts – in short, how will the Big Society be funded?

Private funding

Private funding encompasses donations, philanthropy, CSR and volunteering. Recent data indicates that the recession has significantly impacted on philanthropy, equating to a £700m drop in the total amount donated to charitable causes; as Martin Brookes notes, fewer people are giving and those are giving less. It is therefore more important than ever to maximise the impact of those donations. For example, the Charities Aid Foundation estimates that £70m is lost to the sector in unclaimed gift aid, causing many in the sector to lobby for an 'opt-out' rather than an 'opt-in' system as is currently the case. Another proposal which has been taken up by Cancer Research UK is to introduce a new gift aid composite rate of 30p for every £1 donated but this proposal would require higher rate taxpayers to lose their right to claim any personal tax relief on their donations.

As noted already in this bulletin, the government is said to be reviewing proposals to introduce lifetime legacies, which have long featured in the talk of philanthropy tax planners in the USA but has thus far failed to take hold in the UK because of problems connected with gifts with reservation rules and HMRC's concerns about abuse and about valuation of assets. The principle of tax deductions in relation to gifts of arts, antiques and other tangible personal property, again is widely used in the US and would help compensate the arts and heritage sector, for the cuts that sector is facing, but the Government is only looking to consult on a very limited form of relief here.

Volunteering

The concept of the Big Society places a great emphasis on localism and incentivises citizens to play a greater role in their local community. The levels of volunteering have not greatly increased since the 1980s and there is evidence that it has fallen in 2009/10. To combat this, the government is backing charity-led initiatives like the Big Society Network's 'Your Square Mile' project which will offer a one-stop shop of local information and resources that will better enable community projects to get off the ground. Two councils are taking a Nectar scheme approach by offering Big Society reward points in exchange for volunteering which can be redeemed in shops and restaurants in exchange for good deeds. Compulsory volunteering will also be a feature of welfare proposals for the long-term unemployed with jobseekers being placed on four week community placements to help people find a route back to work. CSR initiatives are now being taken seriously by companies who are willing to donate the time and expertise of their employees through intermediaries like National Talent Bank. We are also seeing a resurgence of co-operatives and mutuals, with the Cabinet Office throwing weight behind community-led programmes to operate or deliver local public services.

Government funding

Leaving the implications of the comprehensive spending review to one side, the problems associated with commissioning and procurement for small not for profit organisations are well documented. There are mixed signals emerging in relation to how the government will improve the commissioning process going forward, not least of which is that the new Compact (i.e. the agreement between the government and the voluntary sector) contains fewer commitments than the original. Furthermore, the Commission for the Compact which is the independent body charged with safeguarding this relationship was a victim of the recent bonfire of the quangos and is to be scrapped. In contrast to this, the Cabinet Office has indicated that new legislation is on the way designed to help level the playing field and enable the whole mix of providers to participate in public service delivery. Nick Hurd has said that this new legislation will represent a change in direction and will help overcome the overwhelming bureaucracy of the existing framework where tendering costs approach 20% of the cost of the service as a whole, which means that only very large providers can immediately participate. What is not clear is how, if at all, the inequalities of VAT as between public sector and private sector service providers will be addressed.

Commercial sources

Given the impact of the CSR, it would appear that private sector funding solutions will be needed but there are limited options available. Retail banks will not lend to civil society organisations due to generally low returns, the insecurity of contract based work and the perceived absence of professionalism in the sector. This puts greater responsibility on specialist lending sources such as Charity Bank and the Co-Operative Bank but even these types of specialist institutions have expressed concerns about the risk profile of the sector. The proposal to establish the 'Big Society Bank' which will provide finance to charities, social enterprises and community groups from the estimated £400m sitting in dormant bank accounts has already encountered difficulties. The difficulties of tracking down owners of dormant accounts means that the Bank is now expected to begin with reserves of as little as £60m, which will not be enough to cover the spending gap.

As a consequence of these lending difficulties, there is a new emphasis on social enterprise investment and it has been encouraging to see a multitude of specialist funds appear over the last ten years specialising in this area,

perhaps the most notable of which is the Bridges Ventures Fund which has provided over £120m of private sector investment in social enterprises since 2002. There are also new innovations being implemented and piloted such as social impact bonds whereby the investor receives a return in the event that a positive social outcome is achieved; community bonds which yield modest interest but enable people to support charitable causes knowing their money will be returned at the end of the investment period; and ideas like the Social Stock Exchange which will enable social businesses to raise equity finance from City investors. A key challenge in this area will be educating investors about the social enterprise market, which is not straightforward and does not have a single set of characteristics and therefore will be difficult to define as an asset class. This will require development of a new language for and method of assessment of social return which potentially only relatively sophisticated investors will understand.

Charities

Grant-making charities are still recovering from the devastating impact of the recession on their investment portfolios, and the continuation of low interest rates continues to reduce their grant-making capacity. Whilst charities can make social investments, not clearly driven by profit, generally speaking, this is only permitted if the investment directly advances a primary purpose objective. Indeed, this type of programme-related investment is not an investment in a conventional sense. This restriction can significantly inhibit charities from investing in this sector and the Charity Commission has been reviewing its CC14 guidance on investments to encourage charitable foundations to consider social investments as part of their overall portfolio where they have power to do so.

It would appear that the policy agenda is creating specific legislative and non-legislative powers to catalyse a cultural shift towards the Big Society but it is undoubtedly true that the impact of the CSR has made income streams more precarious than ever and has created enormous challenges for social enterprises and charities, which will make it difficult for them to take advantage of opportunities arising in this new environment.

STRATEGIES FOR EUROPEAN CHARITIES TO MAXIMIZE THEIR INVESTMENT RETURNS IN THE UNITED STATES

By Brendan Wilson

Brendan Wilson explains how charities based in the EU can take advantage of withholding tax exemptions on US investments

European charities often invest their assets in US stocks. The problem for European charities is that the US imposes a 30% withholding tax on certain US source income of foreign organizations. As a result, European charities may receive significantly lower returns than they could obtain on their US source investment income if they were not subject to US withholding tax. Fortunately, there are solutions to this problem. With some assistance of US legal counsel, European charities can avoid the 30% withholding tax entirely, and can also request a refund of income previously withheld.

Qualifying for the withholding tax exemption

Under US tax law, foreign organizations that could be recognized as exempt from US federal income tax under Section 501(c) of the Internal Revenue Code (the Code) generally are not subject to withholding on their passive income. European charities that have passive investments in the US can qualify for exempt status under Code Section 501(c), and thereby avoid the 30% withholding tax, by taking one of the following actions:

  1. File an Application for Exemption with the Internal Revenue Service. European charities can file an exemption application with the US federal taxing authority, the Internal Revenue Service (IRS), and obtain a determination letter from the IRS recognizing the Foundation as a tax-exempt organization under Code Section 501(c); or
  2. Obtain an Opinion of US Legal Counsel. Instead of filing an exemption application with the IRS, European charities can obtain an opinion of US legal counsel concluding that the organization would qualify as a tax-exempt organization under Code Section 501(c) if it was formed in the United States.

European charities that obtain an IRS determination letter have the security of knowing that they qualify for exemption from US federal income tax under Code Section 501(c) and are therefore not subject to the 30% withholding tax on their passive US source income. Despite this benefit, many European charities elect not to file an application for exemption with the IRS for three reasons: (a) the application process is administratively burdensome and requires European charities to disclose significant amounts of information to the IRS, which can be both time consuming and costly; (b) the IRS typically takes at least 6 months to process and approve applications for exemption from European charities, and may take more than 1 year to issue a final determination letter; and (c) European charities that obtain an IRS determination letter generally are required to annually file an extensive information return with the IRS. As a result of these limitations, many European charities prefer to obtain an opinion of counsel rather than an IRS determination letter when seeking to avoid US withholding tax.

Avoiding US withholding

Armed with an IRS determination letter or an opinion of US legal counsel, European charities can begin the process of obtaining exemption from the 30% US withholding tax on US source income. In general, the exemption from withholding requires European charities to submit to the party responsible for making the payment of the US source income (the withholding agent) (a) the IRS determination letter or opinion of U.S. legal counsel, and (b) a US Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Withholding.

European charities should be aware of the disclosures they are required to make when filing the Form W-8EXP with a withholding agent. In particular, the Form W-8EXP requires European charities to certify what portion, if any, of the income they receive from their US investments constitutes unrelated business income. In general, unrelated business income is any income from a trade or business regularly carried on that is not substantially related to a particular charity's exempt purposes. European charities that receive unrelated business income generally are subject to US federal income tax with respect to such income, even if they have an IRS determination letter or opinion of legal counsel indicating that they are exempt from federal income tax under Code Section 501(c). In most cases, any income received by European charities from passive US source investments, such as dividends, royalties, rent, or interest, will not constitute unrelated business income and will therefore be exempt from US federal income tax withholding.

The Form W-8EXP also requires European charities to disclose if they would be classified as private foundations under US tax law, and therefore subject to a special 4% private foundation excise tax on their US gross investment income. In general, European charities would be classified as private foundations under US tax law if they receive their funding from a limited number of sources. European charities that are uncertain whether they would be classified as private foundations under US tax law can refer to their respective IRS determination letters or opinions of US legal counsel, which should indicate their classifications for US tax purposes.

Obtaining a refund of amounts previously withheld

European charities that have already earned passive income from US investments may be able to use their IRS determination letter or opinion of US legal counsel to request a refund of amounts previously withheld. European charities that obtain an IRS determination letter can request a refund by filing an annual information return with the IRS on Form 990 or, if they are classified as private foundations, on Form 990-PF. European charities that have not obtained an IRS determination letter (i.e. European charities that have instead obtained an opinion of counsel) can file a refund request with the IRS using Form 1120-F, US Income Tax Return of a Foreign Corporation. European charities established as charitable trusts may be able to request a refund from the IRS by filing other applicable returns.

Other solutions

In some cases, European charities may determine that they cannot or should not assert that they qualify for exemption under Code Section 501(c). In such cases, European charities can still minimize their US withholding tax liability if they are resident in a country that has a tax treaty with the US that provides for reduced withholding tax rates. To take advantage of such treaty benefits, European charities generally have to complete and file Form W-8BEN, Certificate of Foreign Status of Beneficial Owner.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions