Articles

Written by Dan Busby
From his column God, Government and Me—Money in the Church

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As we near the close of 2015, it is an excellent time for church leaders to review yearend giving issues. The proper handling of these matters enhances trust with givers, while poor handling of contribution issues has just the opposite impact.

Consider these key yearend contribution issues:

Year-to-Date Giving Records

As contributors to the church approach yearend, do they know where they stand in their year-to-date giving? In other words, in addition to providing yearend giving statements to givers, do you provide periodic statements during the year? Many givers, myself included, would like a pre-yearend statement to review. The holiday season is a wonderful time to review pledge fulfillments and to consider even greater generosity to the Church and God before December 31.

Love Offerings

We all want to be generous to church staff at Christmas. The question is: “How do we handle these offerings?” If gifts are given directly from church attendees to members of the staff, there are no charitable tax deductions for the contributors and the amounts given are probably taxable to the recipients.

For some congregations, love offerings are received for multiple church staff members as-a-whole with church leaders (other than staff) determining the distribution of the gifts. In such instances, givers generally may claim charitable deductions and the church should provide charitable gift acknowledgments. Any amounts paid to staff members should be added to their Forms W-2 as taxable compensation.

When a church raises a love offering for a specific pastor, it is difficult to justify providing a charitable gift deduction to the giver, because the gifts have the appearance of being made to or for the benefit of the minister instead of to or for the benefit of the church. Again, such gifts should be reported by the recipient as taxable income.

Individual Retirement Account (IRA) Rollovers

You might be surprised how many people in your congregation have healthy balances in their IRAs. The so-called charitable IRA rollover is a provision that expired on December 31, 2014, but will likely be renewed for 2015 before Congress adjourns this year. This allows individuals (age 70½ or older) to rollover funds out of an IRA to a church or charity without reporting the IRA withdrawal as taxable income. The previous law (and the expected extension of this provision) permitted these rollovers up to $100,000 per year. Many givers are unaware of this giving option. While we cannot promise that the provision will be extended until it is extended, communicating this opportunity to the congregation as soon as Congress authorizes the provision could inspire generosity before the close of the year.

Timing of Yearend Charitable Gift Deductions

Gifts of cash or checks physically received on or before December 31 qualify for 2015 charitable gift acknowledgments. If a gift by check is mailed to the church, the “delivered-when-mailed” rule applies—the date of the mailing is generally deemed the date of delivery. Gifts by credit card are generally deductible by the giver based on the date the charge is recorded by the issuer of the credit card. Other electronic donations are generally deductible at the time payment is made by the bank.

These charitable giving issues and many more are covered in an upcoming book: The Guide to Charitable Giving for Churches and Ministries, co-authored with my two colleagues, Michael Martin and John Van Drunen. Meanwhile, churches may gain additional information from our Reporting Procedures for Congregations, available for Nazarene churches here. (Editor’s note: the 2016 version will be released in January.)

Dan Busby is president of ECFA (Evangelical Council for Financial Accountability), co-author of the annual Zondervan Tax and Finance Guides and The Guide to Charitable Giving for Churches and Ministries.

 

Q&A

Our church has one pastor and we receive a love offering at Christmas to honor our minister. We do not include the love offerings on the pastor’s Form W-2 at yearend. Are we doing this properly?

No. Since your church has one pastor, the implication is that the church attendees understand the proceeds of the love offering will go to the pastor. When the donor knows that a gift will go to a specific person, tax law generally treats the gift as if it were made to the specific person, and it is not deductible as a charitable contribution. The payment of the love offering to the pastor is taxable.

Our church has three pastors on staff. We raise a love offering at Christmas to honor our ministers. Our church board determines the distribution of the offering between the pastors. We also report the love offering as taxable compensation on the Form W-2 of our respective pastors. Are we handling these offerings correctly?

When an occasional love offering is raised for more than one staff person (e.g., when an offering is received as a Christmas gift or for a pastor’s appreciation gift, and the funds will be distributed to more than one staff member), if the church board determines the recipients and the allocation of the money between staff members, donations to the love offering are generally tax deductible and the church should provide charitable gift acknowledgements to givers. The payment of the love offering is taxable to the recipients and should be reported on their Forms W-2.

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