How would your church handle these charitable contributions situations?
- Steve donates a car to the church and specifies that the car be given to the Jones family, a needy family and members of the church. He wants a charitable contribution.
- Paul gives a $1,000 check to the church but wants the money to go to ABC Mission in the Philippines. He wants a charitable contribution.
- Mary gives a $500 check to the church but wants the money to go to Rev. John Smith, not a church member. She wants a charitable contribution
- Alice, the church secretary, decides not to accept her pay for one week (to save the church some money), but wants a charitable contribution for her time she worked without pay. She wants a contribution receipt for $600 (40 hours @ $15/hour).
- Dick, chairman of the board, who owns a lumber yard, donates a truck load of lumber for the church's building project and wants a contribution receipt for the retail value of the lumber.
- Charles Rich donates some land to the church and wants a contribution receipt.
How would your church handle the above situations?
Contributions made directly by a donor to needy individuals are not tax deductible. To qualify for a charitable deduction, contributions must be made to a qualified charity, such as a church. The gift must be given to the church with "no strings attached." That means that the church can do anything with the contribution that they wish after they receive it.
In examples of 1, 2, and 3 above, the contributions were not given for the church's use. The church should not accept the contribution. These contributions are not for the use and benefit of the church. No contribution receipt is to be given.
Services, giving of your time (#4 above) or the use of your property, such as allowing the youth to use your cabin, would not qualify as a deduction. No deduction is allowed for the contribution of services to a church, nor does a gift of the right to use property yield a tax deduction to the donor. Receipts should not be issued in either of these situations.
Donors may donate items (#5 above) to the church and request a receipt for the retail value of the items given, but the church should not give such a receipt with an amount on the receipt. An acknowledgement of the items donated should be given to the donor. The acknowledgement should NOT state the value of the gift. It should only state the date of the gift and a description of the items donated should he noted.
If the donor gives a non-cash donation such as described in #5 above and the value of the non-cash is in excess of $5,000 (except securities), the gift must be appraised by an accredited appraiser and IRS Form 8283 must be used to document the gift. The church will sign the Form 8283 to acknowledge the receipt of the items.
Real estate gifts (#6 above) to a church can bring headaches as well as it can bring opportunities. Most gifts of property would normally be valued at over $5,000, so the IRS Form 8283 that we described above as well as an appraisal would be needed.
Many times when someone wants to give a church some property the first thought is about the money the church could receive if they sold the property or rented the property. Before accepting the property the church should do an inspection of the property. Find out what the property has previously been used for. An Environmental Site Assessment is often a good prerequisite to start with. Actual sampling of soil, air, ground water and/or building materials is typically not conducted during a Phase I Environmental Site Assessment..
If a site is considered to possibly be contaminated, a Phase II Environmental Site Assessment may be conducted. The church should also obtain names of any co-owners and their ownership shares, recent tax statements, recent appraisals, information on any current leases or contracts outstanding, details of any debt on the property as well as a survey of the property and legal description.
So you can see that a gift of real property can bring headaches and possible liabilities as well as opportunities. When the church establishes a clear, easy-to-follow set of charitable contribution guidelines, they can avoid a lot of problems for the future. Carefully designed guidelines can help avoid hard feelings of donors when problematic situations are resolved ahead of time.
Here is an example of some additional wording that could be added to the churches guidelines:
"All donations accepted by the church will be allocated to the general fund unless it is designated to an already established designated fund. Establishing a designated fund will be made by the finance team."
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