Our organization is preparing the docs for a 501(c)3 filing in the
State of California.  Our organization will raise funds through tax
deductible contributions and donate 95% of the proceeds to orphanages
in Vietnam.  There will be no paid officers or employees.

Can we take the tax deductible funds and use them for the benefit of
people in another country?  I'm assuming the answer to that question
is yes since the Red Cross does it all the time, but I wanted a
source.

Vietnam, being a communist country, is for the most part a corrupt
government.  Many organizations that donate food and clothes find
their donations are stolen at the docks and distributed for sale on
the streets of Ho Chi Minh City and they never reach their intended
destination.  In other cases, government officials extort the aid
volunteers for money to bring the food and clothing to the orphanages.
 Our plan is to bring cash into the country and negotiate with the
locals for the delivery of food, clothing, and construction supplies
while at the orphanages.  In this way we can be assured that the money
is benefitting the people we are supporting.  My question is:  Is
there any problems with us withdrawing cash from our organization and
taking the funds to Vietnam, purchasing what we need, as long as we
get receipts?  What complications might be present?

Hello spencercat,

I should emphasize the disclaimer at the bottom of this page, which
states that answers and comments on Google Answers are general
information, and not intended to substitute for informed professional
tax or legal advice.

As it happens, the IRS is considering issues relating to international
grant-making and other international activities of domestic 501(c)(3)
organizations.  It solicited comments on the subject, though I have
not seen any indicaiton that it has yet changed any requirements on
the subject.

"PART IV – Items of General Interest - International Grant-making and
International Activities by Domestic 501(c)(3) Organizations: Request
for Comments Regarding Possible Changes - Announcement 2003-29"
Internal Revenue Service

I think that much of the material in this announcement will be of some
interest to you.  In particular, here is a description of "existing
law" on pages 2-4:

"Rev. Rul. 71-460, 1971-2 C.B. 231, provides that a domestic
organization that conducts some or all of its activities outside the
United States is not precluded from qualifying for exempt status under
section 501(c)(3). See also Rev. Rul. 68-117, 1968-1 C.B. 252, and
Rev. Rul. 68-165, 1968-1 C.B.

Rev. Rul. 68-489, 1968-2 C.B. 210, provides that an exempt
organization under section 501(c)(3) does not jeopardize its exempt
status by distributing funds to organizations not themselves exempt
under section 501(c)(3), provided the exempt organization:

1) retains control and discretion as to the use of the funds;

2) maintains records establishing that the funds were used for section
501(c)(3) purposes; and

3) limits distributions to specific projects that are in furtherance
of its own exempt purposes.

* * *

Rev. Rul. 63-252, 1963-2 C.B. 101, and Rev. Rul. 66-79, 1966-1 C.B.
48, provide guidance as to whether and under what circumstances gifts
to domestic
charities that subsequently transfer the gifts to foreign
organizations are deductible by donors."

I have found the revenue rulings on a site called TaxLinks, which is
devoted to providing such rulings.

"Rev. Rul. 71-460 - 1971-2 C.B. 231"
TaxLinks
http://www.taxlinks.com/rulings/1971/revrul71-460.htm

"Rev. Rul. 68-117 - 1968-1 C.B. 251"
TaxLinks
http://www.taxlinks.com/rulings/1968/revrul68-117.htm

"Rev. Rul. 68-165 - 1968-1 C.B. 253"
TaxLinks
http://www.taxlinks.com/rulings/1968/revrul68-165.htm

"Rev. Rul. 68-489 - 1968-2 C.B. 210"
TaxLinks
http://www.taxlinks.com/rulings/1968/revrul68-489.htm

"Rev. Rul. 63-252 - 1963-2 C.B. 101"
TaxLinks
http://www.taxlinks.com/rulings/1963/revrul63-252.htm

"Rev. Rul. 66-79 - 1966-1 C.B. 48"
TaxLinks
http://www.taxlinks.com/rulings/1966/revrul66-79.htm

See also:

"K. Foreign Activities of Domestic Charities and Foreign Charities",
by James F. Bloom, Edward D. Luft, and John F. Reilly
Internal Revenue Service
http://ftp.irs.gov/pub/irs-tege/eotopick92.pdf

"O. Domestic Organizations with Foreign Operations"
Internal Revenue Service
http://ftp.irs.gov/pub/irs-tege/eotopico83.pdf

It seems, from my layman's perspective, that the current law is
favorable to your activities.  (Only a lawyer or tax advisor could
give a professional opinion.)

However, the IRS's announcement suggests that changes or
clarifications might be forthcoming.  I suspect that publication of
new requirements or guidance would be announced on the IRS home page,
or on one or more of these pages:

"Charities & Non-Profits"
Internal Revenue Service
http://www.irs.gov/charities/index.html

"The Newsroom - Hot Topics"
Internal Revenue Service
http://www.irs.gov/newsroom/article/0,,id=97322,00.html

"The Newsroom"
Internal Revenue Service
http://www.irs.gov/newsroom/index.html

I hope that this information is helpful.

- justaskscott


Search terms used, in various combinations on Google, and/or on the
IRS site:

"501(c)(3)"
site:irs.gov
"revenue ruling" [or "revenue rulings"]
71-460
68-117
68-165
68-489
63-252
66-79
"international grant-making"

You may not be allowed to bring cash to Vietnam except thru banking
system. You can TT your fund into your bank account in VN and draw
cash from there. Cash will be in VND