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Opinion Letter

Hogan & Hartson L.L.P.

August 11, 1999

Re:  Charitable Contribution Deductions for iGive Members

Dear Rob:

     Based upon our conversations and the attached draft materials you have provided to us, we understand that, Inc. ("iGive") plans to launch a program intended to enable iGive members who shop at iGive's "on-line mall" the opportunity to make tax-deductible, charitable contributions, within the meaning of Section 170 of the Internal Revenue Code of 1986, as amended (the "Code").  As explained to us, iGive members currently purchase products from vendors that participate on the iGive web site.  By making their purchases through the iGive web site, these vendors agree to provide their products to the iGive members at a reduced price.  This price reduction takes the form of a vendor "rebate" which will be credited by iGive to accounts owned by the respective iGive member (each, a "Rebate Account").  Because all parties agree that the funds in each such Rebate Account belong to that member, the member has complete discretion as to the disposition of the funds in the Rebate Account, i.e., the member may direct iGive to (1) return to the member the balance of the funds in the member's Rebate Account, or (2) transfer some or all of such account balance each month to an entity that has been determined by the Internal Revenue Service ("IRS") to qualify for exemption from federal income taxes pursuant to Sections 501(c)(3) of the Code (a "Qualifying Charity").  The only material restrictions placed on an iGive member are that any designated recipient be a Qualifying Charity and that no more than $250 be contributed by such member in any month to a single Qualifying Charity.  Periodically or at the end of each year, iGive plans to provide each of its members with a listing of transfers made monthly on behalf of the member to the Qualifying Charities designated by such member.

     Although there is not a great deal of authority directly on point in regard to iGive's specific plans, the above-described activities are very similar in all material respects to a program that the IRS approved in a "private letter ruling" that it issued in 1996 to a credit card company.  See IRS Priv. Ltr. Rul. 9623035 (March 8,1996), copy attached.  1/Please note that while a private letter ruling is directed only to the taxpayer to whom it is issued, and can be relied upon only by that taxpayer, it nonetheless is instructive as to the position of the IRS on particular matters.  Moreover, the position adopted by the IRS in Priv. Ltr. Rul. 9623035 appears to us to be consistent with well-established tax principles.

     Keeping this in mind, the IRS makes several important and relevant points in its ruling.  First, in order for a gift to qualify as a charitable contributuion it must be made with donative intent, i.e., the contribution must be voluntary.  See U.S. v. American Bar Endowment, 477 U.S. 105 (1986).  Second, a charitable contribution is considered made in the year it is delivered to a Qualifying Charity.  Cf. Rev. Rul. 78-38, 1978-1 C.B. 67; Rev. Rul. 85-184, 1985-2 C.B. 84; and Rev. Rul. 55-192, 1955-1 C.B. 294 (collectively suggesting that a gift is made when a donor delivers a contribution to a charity or its agent).  Third, if a single contribution of more than $250 is made to a particular Qualifying Charity, the donor must receive contemporaneous written acknowledgement from the Qualifying Charity.  See Section 170(f)(8) of the Code.

     The program planned by iGive is entirely consistent with the IRS position in the above-described letter ruling.  First, iGive donors will have unfettered discretion to either (1) keep all of the funds in their respective Rebate Accounts, or (2) contribute some or all of the funds in such accounts to a Qualifying Charity.  This should satisfy the requirement that a charitable contribution be voluntary.

     Next, we understand that iGive recognizes it will be acting as an agent of its iGive members and not of any of the Qualifying Charities to which contributions will be made.  Since contributions will be received by Qualifying Charities upon delivery of the funds to them, e.g., upon receipt of a check or the direct deposit of such contributions by electronic means, satisfaction of the rule that a gift is made in the year delivered simply requires iGive to maintain careful records as to the dates on which gifts are delivered and to be mindful of avoiding inaccurate representations to iGive members as to the timing for delivery of their gifts.

     Third, by imposing a $250 limit or "ceiling" on the amount of any contributions that an iGive member can make to a single Qualifying Charity in any month, the iGive program is consistent with the substantiation rules imposed by I.R.C. Section 170 (f)(8).

     Finally, it should be noted that iGive is correct in stating in its program materials that contributions made from a member's Rebate Account "may" entitle such member to a tax-deductible, charitable contribution.  For example, there are various percentage of income tests described under Section 170 of the Code, which can operate to reduce or eliminate a taxpayer's ability to deduct a particular contribution from federal taxable income.  For this reason, iGive plans to suggest to its members that they consult with their own tax advisors as to their ability to deduct any contributions they might make under this program. 

     In sum, iGive's proposal to enable its members to make tax-deductible, charitable contributions to Qualifying Charities appears to be entirely consistent with a program previously approved by the IRS with respect to the deductibility of charitable contributions for credit cardholders of a credit card company. 

1/ See also Priv. Ltr. Rul. 8309097 (November 30, 1982), wherein various merchants and a savings and loan institution ("S&L") entered into an agreement whereby customers who purchased goods from the merchants received rebates credited to their accounts at the S&L.  As in Priv. Ltr. Rul. 9623035, the IRS determined that amounts paid as rebates were not income to the customers.  More importantly for present purposes, the IRS ruled that customers who assigned their rebate to a qualifying 501(c)(3) church were entitled to charitable contribution deduction treatment as the assignment was similar to the delivery of a check that ultimately clears.

Please let us know if you have any questions concerning the foregoing.


Deborah T. Ashford

Howard S. Silver


Hogan & Hartson offices