The local church has a Deacon's fund to which donations can be made. It is used for whatever the church decides to do with the money. There is a family which the church wants to give money to as a family member is ill. If the church says that all donations to this fund in the month of November will go to this family, would this be considered a restricted donation and therefore not deductible by the donor? Or could you make the argument that since the donor is not specifying how the donations are to be used, this is unrestricted?
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Not Restricted, probably
That's like saying the plate today will go to Katrina Relief. That's not the only outreach program the church had all year. That fund is administered by the church and they make the decisions on their outreach recipients. One of those recipients will get some money based on November collections. But, there is more money in that fund, right? Collected throughout the year and disbursed throughout the year to other causes? It's not just a fund created to benefit one individual/family? The donor didn't give a gift of money to the church with strings attached? The fund was not restricted; the church was able to decide to give to a needy family in November. If the fund had been restricted, then the church would NOT have been able to give to that particular family but would have to stick with the restriction in November and forever. Read the minutes when the fund was set up; did they restrict the fund in the way you fear? Facts and circumstances. It's probably fine, but if you have worries, then do some research at the church and at its national church, too. -
I'd be careful. If the church says "All donations will go to this family," that could be troublesome.
I'd agree to consult the national council. They'll know if it's trouble, or if there's certain wording that would keep everything calm.Comment
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your favorite charity
The rule applies to restrictions imposed by the donor. You are free to select your favorite charity, which will of course use the donations only for the purpose that the charity is set up to serve.Comment
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Can the church change its mind?
Can the church change its mind and give half of November's receipts to the family and half to a family they will sponsor from Katrina's wrath? Even if you don't expect them to use your contribution for another purpose, can the church decide how to use its receipts? Then, it's probably not restricted. But, you're really asking a legal question. The church treasurer might have a newsletter or handouts that discuss any restrictions on the use of their funds. Research at the church and at any regional church governing body or the national church; they'll have lawyers that have ruled or will rule on the wording and the restriction or not of a particular fund of interest to you. Then, based on what you learn, you can determine the tax implications.Comment
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benefiting a particular individual
I recall that some agencies were criticized and even investigated for diverting 9-11 donations to other relief projects. Donors have a right to hold the charity to its promises. Restricting a gift is a narrower form of control, generally benefiting a particular individual.Comment
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Thank you everyone for the fast responses, especially Lion & Armando (but that's only because you seem to be leaning in my direction). But what is the consensus? Would you advise the minister that this is OK? And by the way, this fund is a general fund not used for any one activity or persons benefit. I will however have the minister check with the chapter suits.Comment
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Benevolence Fund
Fully deductible as a charitable contribution.
We have a benevolence fund in our church. This was started when several members
in our church had disasters in their home.
Members contribute to the fund and the funds are paid out, as designated by a committee, to any member of the church who needs assistance. They have to ask
for it and the committee then decides on if and how much to pay out to the individual.Comment
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Yes, it can be done, and it is done, but that does not mean you are safe from problems down the road. Charities, including churches, will get into trouble if they get too liberal handing out money to people. You can't just say so and so really needs the money because their house burned down. You would have to have your charitable purpose be that you provide relief for victims of house fires in the community. And I don't believe a church could discriminate and say only memebers of that church qualify for the relief. It has to be done for the benefit of the public. It can't be done for the exclusive benefit of the members of the exempt organization.Originally posted by Bird LegsComment
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Charitable deductions
I agree with Bird Legs. Churches do this all the time. Even gifts to missionaries.Comment
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A church can give money to a missionary because a missionary is performing charitable services for the church. The missionary doesn’t pay income tax on the income because it is usually below the filing requirement, or at least the foreign earned income exclusion, and the money is also exempt from SE tax under Section 1402(c) because missionaries usually perform their mission under a vow of poverty.Comment
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Deacon's Fund
The follow comes from BJ Worth's Income Tax Guide for Minister's. Short of the QF of the clergy world.
DECON'S FUND or BENEVOLENCE FUND:
Churches should never hesitate to help people in the community who are unemployed, have catastrophic illness, been an accident victim, or aged
Benevolent gifts to non-employees that are based on their needs are non-taxable and never to be reported on an information return (form 1099.)
Churches should be actively meeting the benevolent need of their community.
Deductable contribution receipts should not be issued when the church does not have the right to control the monies.
Caution: When an employer helps an employee or a member of an employee's family with crisis needs it will result in taxable compensation to the employee, according to Se. 61.Confucius say:
He who sits on tack is better off.Comment
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From IRS Pub 1828, Tax Guide for Churches and Religious Organizations
PRIVATE BENEFIT
An IRC section 501(c)(3) organization's activities must be directed
exclusively toward charitable, educational, religious, or other exempt
purposes. Such an organization's activities may not serve the private
interests of any individual or organization. Rather, beneficiaries of an
organization's activities must be recognized objects of charity (such as
the poor or the distressed) or the community at large (for example,
through the conduct of religious services or the promotion of religion).
Private benefit is different from inurement to insiders. Private benefit
may occur even if the persons benefited are not insiders. Also, private
benefit must be substantial in order to jeopardize tax-exempt status.
We checked into this a few years ago for a widow who recently lost her husband to cancer and left her with three kids, including a one year old. Our church could not help her as an organization unless it had a policy of helping widows in the community at large. However, individual members of the church could help privatly or through pooled contributions. But the donations would not have been tax deductible.Comment
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>>But the donations would not have been tax deductible<<
Does that mean they didn't make the donations?Comment
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We had all kinds of people help the family out with money, gifts, donating their labor to finish off their basement, people holding garage sales to raise money, etc. The lack of a tax deduction didn't stop people from donating.Originally posted by jainenComment
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