Читать книгу The Tax Law of Charitable Giving - Bruce Hopkins R., Bruce R. Hopkins, David Middlebrook - Страница 78

The making of a pledge does not give rise to a federal income tax charitable contribution deduction. The deduction that is occasioned, such as it may be, is determined as of the time the pledge is satisfied.⁹⁵

The enforceability of a pledge is a matter of state law. Some states require the existence of consideration as a prerequisite to the existence of an enforceable pledge; other states will enforce a pledge on broader, social grounds.

Usually, a pledge is made by a potential donor in the form of a written statement—a promise to the potential charitable donee of one or more contributions in the future. An example of the rule is that a pledge of a stock option to a charitable organization produces an income tax charitable deduction in the year in which the charitable donee, having acquired the option, exercises it.⁹⁶ Another illustration of this is a funding agreement, under which a person commits in writing to make multiple contributions to a charitable organization over a stated period, for purposes such as general operations or endowment: The charitable contribution arises in each year of actual payment.⁹⁷

As one court case reflects, however, a charitable pledge can arise in other ways. A trustee of a small college and his colleagues were concerned about the long-term financial viability of the institution. He wanted to substantially augment the college's endowment fund. To that end, he caused a company (of which he was the president) to issue (in 1981) to the college a zero-coupon original-issue discount bond, with a term of 50 years and a $20 million face amount, payable upon maturity in 2031 (unless the bond was retired early). The purchase price of the bond was $23,066 (representing the 1981 present value of $20 million, payable in 50 years, discounted semiannually using a 14 percent annual interest rate). The company was obligated to maintain a sinking fund sufficient to retire the bond at full maturity; it had the option to retire the bond at a discount after July 1986. The president of the company personally arranged for contributions to the school to cover the purchase price of the bond.

The company is on the accrual basis of accounting. The total interest that is to accrue over the term of the bond (the original-issue discount) is $19,976,934. One-fiftieth of the total discount is $399,539. That amount is what the company annually transferred to the sinking fund and deducted as interest accrued on indebtedness.⁹⁸ The mechanics of this transaction were dynamic. The accrued interest would have been taxable to a commercial taxpayer; the college, however, being tax-exempt, was excused from this tax liability. In 2031, it will receive $20 million for a 1981 outlay of $23,066. The company could have retired the bond as early as August 1, 1986; the retirement payment would have been $45,377, with the company enjoying about $2 million in tax deductions. (Even if the IRS recaptured a tax deficiency attributable to the company's deductions for interest accrued but not paid, the company would have had the use of that money to invest in the meantime.) The IRS asserted, however, and a court agreed, that the transaction lacked a business purpose other than tax avoidance, and disallowed the deductions.⁹⁹ The court concluded that the bond was a legitimate indebtedness for tax purposes and that the transaction had some economic substance for the company. The court made an evaluation of the company's motive for the transaction and found that it was (other than tax benefits) a means to provide the college with an investment that would substantially enhance its endowment. The court wrote that this motive, “while admirable, is wholly unlike the economically self-interested purpose that taxpayers must demonstrate.”¹⁰⁰

Thus, in the absence of any other economic, commercial, or business purpose for the bond transaction, the court found that it lacked the requisite independent business purpose and disregarded the debt form of the transaction for tax purposes. Did the company contribute the $19,976,934 to the college? The answer is no, because no payments have yet been made to the institution (even accrual-basis donors must actually make payments on a timely basis).¹⁰¹ Thus, the issue is one of timing, with the bond documentation reflecting a pledge. It would seem that, once made, any payments to the school would be deductible as a charitable gift (assuming all other requirements were met). After all, the court found that the company's motive underlying the transaction was not a business purpose, but was one of substantial economic disinterest.

When the charitable organization involved is a private foundation,¹⁰² the matter of a charitable pledge can be more complicated if the pledger is a disqualified person¹⁰³ with respect to the foundation. The principal difficulty is with the rules concerning self-dealing.¹⁰⁴ The making of a pledge by a disqualified person to a private foundation, in and of itself, is not an act of self-dealing.¹⁰⁵ Likewise, the making of a pledge that, when it ripens into a contribution, requires a facility or organization to be named after the disqualified person is not an act of self-dealing, because the benefit to the disqualified person is incidental and tenuous.¹⁰⁶ Under some circumstances, however, the satisfaction of a pledge by a disqualified person to a private foundation can be self-dealing. In one instance, for example, a private foundation paid the dues of a disqualified person to a church, thereby enabling him to maintain his membership in and otherwise participate in the religious activities of the congregation. The dues payment was ruled to constitute self-dealing, with the IRS concluding that the private foundation's payment of the dues “result[ed] in a direct economic benefit to the disqualified person because that person would have been expected to pay the membership dues had they not been paid by the foundation.”¹⁰⁷