Rules for charity funding?

Question

Ok. Here's the scenario. If a business were to claim a percentage of its profits goes to charity, and that charity were to be controlled by said company, would those funds be available for distribution as that company see's fit, granted it is a charitable cause? I wonder, would it be legal for that "charity" to be an account, that say...earns an investment return (through various means) granted that the principle and return are both intended for charitable contributions? I believe this to be an effective means of growing funds through financial management. Any thoughts on this would be greatly appreciated.

Answer 1

If you are in the US go to http://www.irs.gov basicly this would be what is called a private foundation.   For more insight go to http://www.foundationcenter.org  Many companies set aside a portion of earnings for charitable causes.   A lot of those have a foundation  or similar arrangement so that that portion of earnings is tax free.  Yes a foundation of that type may earn interest and usually it is from the interest income that grants are made to charitable causes.

Answer 2

without going into too much detail, this is a form of money laundering. In the UK ( i don't know whether you live in the US), you can get tax relief on money or assets given away to charities, however there is a limit. In the UK this is the link http://www.hmrc.gov.uk/CHARITIES/legisla...

If you make this payment regularly and it is a reasonable amount of your profits (ie 40 - 50 % ) or over, the the tax guys will see this as a means of not paying any tax on your profits.

The charity will also be investigated and possibly fined