The idea is that the government would make a donation to the charity that offers them the most services under the condition that the donation is matched by an equal contribution from the charity. And so it works like this:
1) You donate to a charity, it helps you get things you want.
2) You get matched by an equal amount from the charity to give back to the charity.
3) The whole thing is tax free
So, the charitable organization would receive the donation from the government.
It means the whole system is tax-free (for donors who wish to keep the difference). But since nobody knows how it works, it might also take a few years to get into place.
Why do the tax rules not apply in cases where the charity is the charity?
In cases where the charity is an individual, the charitable receipt that the charity receives does not have to be matched, that is, it does not have to be paid by the charity and it doesn’t have to be paid by the individual donating the dollar to the charity. So why are charity officials complaining?
Well, according to the charitable receipts law, that individual may not be able to pay for the money when they donate it to the charity; but they never lose the money. The donor may not even receive the gift before the money arrives in their hands.
There is also an issue about whether the tax code applies to all types of charities, as opposed to just the ones that use the charitable receipts law (for instance, the ones like the Humanitarian International Action Fund that are only tax sheltered). There is just one way to go: the IRS should make a ruling on this one or the other soon.
For example, a man donated $5,000 to a humanitarian organization that provided aid to the poor in his local community. When he called the charity to complain, the charity said it would not pay the $5,000 in taxes because it was not using the charitable receipts law.
The man could not pay the remaining $5,000 when he sent in the money because the IRS was claiming tax-free (for donors who don’t use the charity receipts law).
Is there a limit to how much you can donate to one charity?
In practice, it is hard to know how much can go to which charity. But in the U.S., it is possible to give more to a particular charity than to a lot of other charities.
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