Sunday, October 30, 2011
This Article critically examines the efficiency of the quid pro quo test and its need for an exception in order to conform to the purpose of the charitable deduction; acting as a subsidy to those organizations the government feels provides a community benefit. Throughout the country, firefighters risk their lives on a daily basis to keep the public safe. It is, therefore, imperative they receive the best possible training. One invaluable training method is live-burn training, in which a structure is set on fire providing firefighters with “a level of realism that is unsurpassed.” For over thirty five years, relying on a United States Tax Court case, many believed a taxpayer could claim a charitable deduction for the donation of the taxpayer’s home to the local municipality for live-burn training, while still retaining ownership of the underlying land (live burn donation). In recent years, however, there has been much confusion and debate on whether live burn donations qualify for charitable deductions culminating in the IRS specifically targeting live burn donations and the United States Tax Court overruling its long standing opinion. The battle over whether a charitable deduction is allowed for a live burn donation is still burning in the courts. Assuming the Service does not win the live burn donation fight, it is believed Congress will enact legislation specifically targeting live burn donations. More than likely, Congress will either specifically disallow a charitable deduction for the live burn donation or limit the amount of the deduction with regards to a live burn donation. This article proposes Congress should do the latter and not extinguish the live burn donation, because exceptions to the application of the quid pro quo test should be made when the benefit of the donation to the public substantially outweighs the benefit received by the donor (public benefit exception). Essentially, the public benefit exception should be used to encourage donations that otherwise would be underfunded, as is the case in live burn donations. In conclusion, this Article proposes an amendment to the charitable deduction, thereby allowing a charitable deduction for live burn donations, while recognizing the need for limitations given the perceived abuse and the valuation difficulties of the live burn donation.