-- 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.
-- Expenses you paid for another person who provided services to a qualified organization. For 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."
Unfortunately, IRS publications cannot address every scenario that might be presented. Here's one: A church member designates a contribution to a specific ministry or minister supported by the church. Generally, these contributions are permitted. In these cases, the individual eventually receiving the contribution is an employee or independent contractor of the church or Christian ministy (e.g. a foreign mission organization). As such, the payment represents taxable compensation. Common examples include special collections in support of a local church minister, and those in support of a missionary publicly acknowledged by the church as leading a ministry worthy of the congregation's prayer and financial support.
A couple of suggestions that I offer in these unusual situations:
1. The payment to the designated minister or ministry should made by check or wire transfer directly to that individual or the organization sponsoring his or her Christian ministry. As such, either the church or the sponsoring organization will issue the appropriate IRS information return (typically a Form W-2 or Form 1099-Misc) to the recipient.
2. Be careful to avoid situations in which the substantial majority of the church's payment comes from a donor related to the recipient. Again, IRS Publication 526 denies contribution for which the donor receives or expects to receive a benefit--I would include in this category payments among related parties for whom they might otherwise feel obligated to support. I state this position as follows: "The church or charity must be careful not to become a conduit for recharacterizing otherwise nondeductible personal expenses into charitable contributions." Of course, the church may forward funds to any individual if the sole intent is to maintain the anonymity of a donor who will not be receiving a tax deductible receipt.
3. One final example that seems to come up a lot and, in my experience, receives a wide variety of treatment... My reading of the IRS rules and regulation would allow a tax deduction to donors for contributions to funds maintained by charitable organizations for the support of individuals pursuing missions and other trips designed to fulfill ministry purposes. To the extent that the funds are used for 1) travel, 2) meals and 3) lodging during the trip, they will not be taxable to the recipient. The organization should issue the appropriate information return when the payments exceed these actual costs. For recordkeeping sake, I recommend that the organization handle all disbursement of funds for these three qualifying uses.
I wish that I could be more specific, but there appears to be little other guidance provided by the IRS and court cases. I believe that I am advising in both the letter and spirit of the law.