Monday, October 15, 2012
In the New York Times bestseller The Hunger Games, two representatives selected from each of twelve oppressed districts compete for survival in a televised game that only one may win (“the Games”). To win, heroine Katniss Everdeen must earn the support of wealthy sponsors who have the ability to provide her with life-saving resources. What if after Katniss had succeeded in garnering favor and compassion from sponsors, obstacles were placed in the path of their aid? That outcome seemed too harsh for the author to attribute to even the devious Gamemakers, who govern the rules of the dreadful Games, yet current US charitable law in the context of cross-border giving results in that reality and should be revised.
Today, individuals suffering from oppression and extreme poverty must compete for access to limited resources in the form of international grants and gifts. This article examines a major impediment in the path of US donors desiring to help them and the recent decision of the European Court of Justice to remove the obstacle for European Union Member States in the landmark 2006 case Persche v. Finanzamt Ludenscheid. US charitable laws currently impede the ability of US donors to engage in international giving. As the number of global issues, such as human trafficking, clean water, and extreme poverty, rises, the US must consider an alternative approach. The European Union is moving rapidly toward an approach that would free US donors to use their philanthropic funds to combat global ills.
The main impediment to international giving in U.S. charitable laws is captured in the term “notion of territoriality.” The notion of territoriality is the restriction of an income tax deduction to domestic charities, i.e., those formed within a given country’s borders. The charitable laws of EU countries have historically embodied this notion as well. An examination of the US legislative history associated with the notion of territoriality reveals a lack of justification. Those desiring to keep the notion intact have argued that an alternative approach would be too difficult to implement, which upon consideration proves false. The notion of territoriality is inconsistent with other US charitable giving provisions. These observations, combined with the practical and ideological problems associated with the notion of territoriality, should lead the US to step away from its current approach and to adopt an alternative one.
Europe has made this decision as a result of Persche, which held the notion of territoriality results in a clear violation of freedom of movement of capital under the European Commission Treaty. The cross-border giving model the UK has adopted in the wake of Persche shows that approaches, other than the current US one, are possible and feasible. In fact, the recently revised charitable laws of many EU Member States evince a move away from the notion of territoriality. Although the Netherlands has shown resistance in adopting a new model under Persche, its charitable laws initially placed little emphasis on the notion of territoriality and thus may serve as another example of an alternative approach the US could adopt. US charitable laws should encourage, rather than restrict, the ability of US donors to engage in cross-border giving, and recent changes within the European Union and the historic practice of the Netherlands are instructive. In this article, I will argue for less primacy being afforded to the “notion of territoriality” as an over-arching concept within the legal framework governing cross-border giving in the US, the UK, and the European Union (“EU”) through examining (1) the historical reasons for the notion of territoriality, (2) why territoriality is problematic, and (3) recent solutions to associated problems.
Ingrid Mittermaier (Adler & Colvin, San Francisco) is the commenter.