## Facts

- Following the April 1995 Oklahoma City bombing, donors and organizers rapidly formed funds and organizations to provide financial assistance to victims and their families.
- Taxpayers sought IRS guidance on whether these newly created relief organizations could qualify as tax-exempt charities, and whether donations to them would be deductible.
- The IRS issued an administrative notice addressing (1) requirements for exemption under I.R.C. § 501(c)(3), (2) deductibility of contributions under I.R.C. § 170, and (3) federal income tax treatment of relief payments to victims and families.
- The guidance contemplated organizations focused on a defined group of beneficiaries tied to a single catastrophe and addressed how such limitation could remain consistent with charitable operation.

## Issues

1. Under what conditions may an organization formed to assist victims and families of a specific disaster qualify as tax-exempt under I.R.C. § 501(c)(3)?
2. When are contributions to such an organization deductible as charitable contributions under I.R.C. § 170?
3. How are payments from such organizations to victims and their families generally treated for federal income tax purposes?
4. When does limiting aid to identifiable victims of a particular event remain consistent with the “charitable class” and public-benefit requirements for exemption?

## Decision

- The IRS stated that an organization may qualify under § 501(c)(3) when it is organized and operated exclusively for charitable purposes and provides relief to victims and their families of the bombing (and similar disasters), even if beneficiaries are specifically identifiable.
- The IRS indicated that contributions to organizations that qualify as § 501(c)(3) charities are generally deductible under § 170, subject to ordinary statutory limitations and substantiation requirements.
- The IRS indicated that typical relief payments to victims and families are generally not included in recipients’ gross income when properly characterized as gifts or charitable relief, rather than compensation.
- The IRS recognized that a charity may limit distributions to victims of a particular event if the beneficiaries constitute a charitable class and the organization avoids private inurement and impermissible private benefit.

## Legal Principles

- Relief of the distressed or underprivileged, including disaster victims, is a recognized charitable purpose under § 501(c)(3).
- A group of persons harmed by a particular catastrophe may constitute a “charitable class” even though the group is defined by a specific event and may be identifiable.
- To qualify and remain exempt, a relief organization must be organized and operated for public charitable purposes and must not confer prohibited private inurement or impermissible private benefit.
- Use of objective, need-based or harm-based criteria for selecting recipients supports charitable operation when distributing aid to affected individuals.
- Donor deductibility under § 170 depends on the recipient organization’s qualification as a described charitable organization and compliance with general deduction rules.
- Relief payments are generally excludable from gross income when they function as charitable assistance or gifts; payments treated as compensation for services are generally taxable.

## Conclusion

The IRS provided administrative guidance that properly organized and operated disaster-relief organizations focused on Oklahoma City bombing victims and families can qualify for § 501(c)(3) exemption, donors’ contributions to qualifying organizations are generally deductible under § 170, and typical charitable relief payments to victims are generally not includable in the recipients’ gross income, provided the organization operates for public charitable purposes and avoids prohibited private benefit.


Notice 95-33, 1995-1 C.B. 309 (1995)