March 09, 2010

Charitable Travel (Run it through the Church or Pay it Personally?)

Question:

A donor gave a large sum of money in 2009 to a church's designated fund for missions travel. It was announced that only a small portion of the fund (essentially the portion not received from the donor) was available to the general congregation and that the remainder was sequestered for the donor's 2010 missions travel. Does this procedure comply with the Internal Revenue Code?

Answer:

Publication 526 indicates that travel for charitable purposes is deductible in many cases. Below, I've reproduced a significant section from the Publication.

To me, the bigger issue is not whether the travel is deductible but whether the deduction is allowable in 2009 or 2010 and who must defend its appropriateness in light of the tax rules. Had the donor simply paid for his own expenses, then he would have done so, presumably, in 2010. Also, he personally would stand responsible before the IRS to substantiate his answers to the questions implied in Publication 526 (again, see below). By accepting and disbursing the contribution, the church has put itself in the position of needing to ascertain whether the travel qualifies for a deduction (and in which year it qualifies), a potentially sticky position to be put in when the donor and his tax advisors could handle this themselves.

Publication 526: "Travel. Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. This applies whether you pay the expenses directly or indirectly. You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses.

"The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses."

1 comment:

  1. Thanks for all of your wisdom in this blog. My thought on this situation was that it sounds like deputized funds. As long as the church maintains administrative control over the funds and the trips, then there would be no question about the deductibility of the gift. Also it would not matter what year it was for in this case, thereby supporting the position of the date of the gift being the date of the donation.

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