Contributed By Sullivan & Cromwell LLP
US persons generally may deduct contributions to tax-exempt organisations. US tax-exempt organisations are generally classified into two main groups, private foundations and public charities, distinguished primarily by the level of public involvement in their activities. A public charity generally receives a substantial portion of its support from the general public, and has greater involvement with – and accountability to – the public at large. Contributors to public charities may deduct up to 60% of their adjusted gross income (“AGI”) for cash contributions, and 30% of their AGI for a contribution of long-term capital gain property. A private foundation, however, generally receives most of its support from one person or a small group of contributors and from investment income, and is typically controlled by a family or a small group of individuals. Contributors may deduct up to 30% of their AGI for cash contributions and up to 20% of their AGI for capital gain property. Because private foundations have less exposure to the public, such organisations are subject to operating restrictions and rules to ensure that they are truly organised and operated for charitable purposes and not for private benefit.