Directed Contributions to Mission

[Burke]

I have a receipt from an organization (affiliated with a church) which collects funds solicited by individual missionaries and pays them directly to those individuals in a foreign country assigned there on mission work sponsored by the church. These are used for everyday living expenses. My question is: the contributions are specifically made by the contributor for the support of one family. Are these deductible? (Cks are made out to Mission organization but are being controlled by the contributor as to their disposition.) In this case, the contributor is family.

[appelman]

I would think not.

Although I'm sure a lot of people get away with it.

[Koss]

Contributions

The key question is whether the organization has the right to use the funds for some other purpose, if they choose to do so.

The fact that the contributor is related to the family that ultimately receives the money is interesting, but it's really a distraction.

I don't have a citation handy. But the concept is that when you give to an eligible 501(c)(3) organization, it won't qualify as a charitable contribution if you attach certain kinds of restrictions to the gift.

Some restrictions are okay, while others are not. If I give to a university, with a restriction that the funds may be used only for the construction of the new physics lab, that's probably okay. But limiting the use of the funds to the support of an individual may break the deal.

So the question turns the program guidelines, and the written records of the donation. What's the verbiage in that letter?

If the program merely allows the donor to express a preference, or make a suggestion, as to how the money is used, without limiting the organization's right to determine how it is actually used, then there's no problem. If the program clearly allows the donor to restrict the use, or designate, by name, to whom the money is give, then that may be too much control.

It may not be clear from the letter. I'll bet the letter simply acknowledges the donation and states how it will be used. But that doesn't address whether the organization had a choice.

Is this a Mormon mission?

BMK

[Koss]

Designation

Expressing a clear preference, or recommendation, that the funds be used for a particular person or family may make the contribution nondeductible. And this may be the case even if the preference is only expressed verbally.

It's very subtle. If the contribution is made without any expression of such a preference, with the understanding that the funds may be used for any purpose, but are likely to be used, absent unusual circumstances, for a specific purpose, then it would appear to be a qualifying donation.

The answer lies not in the letter your client received, but rather in whatever communications, whether written or verbal, took place when the donation was made.

Here's what it says in Publication 526:

You cannot deduct contributions to specific individuals, including the following.

Contributions to fraternal societies made for the purpose of paying medical or burial expenses of deceased members.

Contributions to individuals who are needy or worthy. This includes contributions to a qualified organization if you indicate that your contribution is for a specific person. But you can deduct a contribution that you give to a qualified organization that in turn helps needy or worthy individuals if you do not indicate that your contribution is for a specific person.

Example. You can deduct contributions for flood relief, hurricane relief, or other disaster relief to a qualified organization. However, you cannot deduct contributions earmarked for relief of a particular individual or family.

Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses.

Expenses you paid for another person who provided services to a qualified organization.

Example. Your son does missionary work. You pay his expenses. You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services.

Payments to a hospital that are for a specific patient's care or for services for a specific patient. You cannot deduct these payments even if the hospital is operated by a city, state, or other qualified organization.

BMK

[MAMalody]

Per Richard Hammer:

Contributions made directly to a missionary may be deductible if it can be established that the contribution was for the use of a charitable
organization (i.e., a church or religious denomination exercises control or supervision over the missionary). In 1962 the IRS clarified
the application of this principle in a ruling upholding a donor’s contribution to a church fund out of which missionaries, including his son, were compensated:

If contributions to the fund are earmarked by the donor for a particular
individual, they are treated, in effect, as being gifts to the designated individual and are not deductible. However, a deduction
will be allowable where it is established that a gift is intended by a donor for the use of the organization and not as a gift to an individual. The test in each case is whether the organization has full control of the donated funds, and discretion as to their use, so as to insure that they will be used to carry out its functions and purposes. In the instant case, the son’s receipt of reimbursements from the fund is alone insufficient to require holding that this test is not met. Accordingly, unless the taxpayer’s contributions to the fund are distinctly marked by him so that they may be used only for his son or are received by the fund pursuant to a commitment or understanding that they will be so used, they may be deducted by the taxpayer in computing his taxable income. Revenue Ruling 62-113.

This principle has been consistently applied by the courts in determining the deductibility of designated contributions to charitable organizations.

[Burke]

And that has been my understanding. This is not a Mormon mission case. And the funds are not contributed directly to the missionary, although I think the checks which are made payable to the Mission Organization and collected by them in the US, are deposited directly into an account in the missionary's name. In fact, the receipts provided the TP from the mission organization actually state that "all your financial support will go directly to support the XXXX family and their ministry," who are immediate relatives. Five of the receipts are signed by the "Forwarding Agents" of the organization which leads me to believe their only purpose is a conduit for the funds. Three additional documents provided to document deductions are simply deposit slips into the missionary's account.

[FEDUKE404]

Restricted donations

And that has been my understanding. This is not a Mormon mission case. And the funds are not contributed directly to the missionary, although I think the checks which are made payable to the Mission Organization and collected by them in the US, are deposited directly into an account in the missionary's name. In fact, the receipts provided the TP from the mission organization actually state that "all your financial support will go directly to support the XXXX family and their ministry," who are immediate relatives. Five of the receipts are signed by the "Forwarding Agents" of the organization which leads me to believe their only purpose is a conduit for the funds. Three additional documents provided to document deductions are simply deposit slips into the missionary's account.

I would think things could get a bit antsy obtaining an "appropriate" tax receipt for funds that (somewhat) obviously go to a specific person.

Even earmarking funds (such as to a sponsoring church) could create some issues with the IRS lack of gift restrictions requirement.

One could think the far safer, and audit-proof approach, would be to donate the funds to the organization ("in support of Destination Mission") and such should cause no problems. Let the organization distribute those pooled funds to all of those on a mission, regardless of who might have rung more doorbells along the way.

FE