Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-11-30
TAX EXEMPT CHEST
GIFTS ARE LIKELY
Liberal Interpretation of Law
Governing Donations Is
Promised.

Contributions Of corporations to
Community Chest funds in all proba
billty will be exempted from Federal
income tax this year. If corporations
make claim fer such an exemption,
1t was learned last night.
The Bureau of Internal Revenue, it
Is known, plans 10 interpret literally
provisions of the law which provide
that corporations TO get such an ex-
emption must show contributions to
religious and charitable purposes have
q direct business benefit to the cor
poration.
Regulations on the matter have been
issued to tax collectors throughout the
country who will receive tie income
tax returns of the American people for
this year. News of this possible de-
dliction Is received with favor both by
the Community Chests of the country.
and by corporations planning to make
their contributions generous for the
benefit of unemployment relief.
Regulation Explained.
Under the revenue act Of 1928. con-
tributions by corporation are deduct
ible only If the contributions may be
classified as ordinary and necessary ex-
penses of tie business within the mean
ing of section 90 (a) of the act. In
the Interpretation of this part OF the
law. instructions have been issued by
the Bureau of Internal Revenue which
are evidently designed 70 make 1t very
easy for the collectors Of internal rev.
enue to grant the claims OF CORPORA
lions asking their contributions be de-
Quoted from taxable income and, there
fore, exempt from taxation.
These regulations explain that con
tributions made to the organization by
individuals are deductible for Federal
income tax purposes" in the manner
and to the extent provided IN the law
contributions by a corporation" 1t
was explained. however, "are deductible
only If the contributions may be CLASH
fed as ordinary and necessary expenses
of the business within the meaning OF
section % ca of the revenue act OF
1928. To be held deductible as business
expenses. corporate contributions, char
liable or otherwise, must be shown to
have in q direct sense some reasonable
relation to the corporations business,
or it must be shown that the contribu-
lions result in direct benefit to the
corporation.
Classification Outlined.
"In such cases" the instructions read,
"the contributions will be allowed as
deductions from gross income under the
classification of ordinary and necessary
business expenses.
"Careful consideration will be given
In each instance to any facts tending
to show such relation or benefit, but
in the absence of such showing
deduction for corporate contributions
cannot be allowed"
Those familiar with the language OF
the Bureau of Internal Revenue be-
lieve this opens the gate for Washing
ton corporations to contribute to the
Community Chest here, and to avoid
taxation on such gifts. The language
is said to be about as liberal as it could
be written under the circumstances, to
interpret the law as the law now stands
In other words, the intimation could
hardly be broader under the restric-
items of enforcing the revenue laws.
But it was pointed out corporations
are called upon to include the claim
for deduction in their income tax re-
turn, if they expect to have such gifts
exempted from the tax. If this claim
is omitted, the contributions must be
taxed.