Relighting the Charitable Deduction: A Proposed Public Benefit Exception

Authors

• Kristin Balding Gutting, Charleston School of Law

Abstract

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 2004, however, the Internal Revenue Service (the Service) established a task force, charged with the sole purpose of extinguishing live burn donations, and requested that local municipalities not cooperate with taxpayers in executing the requisite paperwork in claiming a charitable deduction for a live burn donation.

This article proposes the live burn donation not be extinguished. Instead, Congress should consider exceptions to the application of the quid pro quo test when the benefit of the donation to the public substantially outweighs the benefit received by the taxpayer (the public benefit exception). Ultimately, this will encourage donations that otherwise would be underfunded, as is the case in live burn donations.

In reaching this conclusion, Part II of this article provides a brief overview of the charitable deduction, including a discussion of its purpose and legislative history. Part III explores the evolution of and current exceptions to the quid pro quo test, which concludes the quid pro quo test is the most workable approach in determining whether a quid pro quo contribution to a charitable organization is deductible. Part IV provides a brief overview of live burn training and the development of the law regarding the live burn donation. Part V argues that in certain circumstances exceptions should be made to the quid pro quo test — the public benefit exception — and discusses the public benefit exception using the live burn donation as the lens to examine the application of the proposed exception. In conclusion, Part V 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 valuation difficulties of the live burn donation. Part VI provides closing remarks.

Recommended Citation

Kristin Balding Gutting, Relighting the Charitable Deduction: A Proposed Public Benefit Exception, 12 Fla. Tax Rev. (2012).
Available at: https://scholarship.law.ufl.edu/ftr/vol12/iss1/6