June 29, 2009

Taxability of Benevolent Gifts to the Recipients

Question:

A church member who had been a frequent volunteer serving in its ministry decided to attend seminary. Because of the financial burden this created for him and his family the church has designated them as deserving of benevolence gifts. Will these benevolence gifts (certain to exceed $600 in the year) be subject to Form 1099 reporting requirements?

Answer:

As long as the support provided him is neither in retroactive or anticipatory consideration of serves he has or will perform for the church, this benevolence represents non-taxable income. Unlike a missionary, for example, who is formally recognized as performing the work of the church to advance the worldwide cause of Christ on its behalf, the former volunteer in not an employee, nor independent contractor of the congregation.

I suggest a re-reading of my March 7, 2009, blog posting which brought a few cautions about some benevolent activities.

Benevolence Fund Receipts and Disbursements

Also, I've recently been pursuing some resources from the Evangelical Council for Financial Accountability (www.ecfa.org) -- I read its Accounting and Financial Reporting Guide, plus e-mailed a question -- and find them to be very helpful. The ECFA seems to have been a leading voice in a few IRS deliberations regarding benevolent gifts.

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