February 02, 2011

Contributions to Foreign Churches

Question:

Do designated gifts towards foreign churches qualify as tax-deductible? The foreign church itself does not issue tax-deductible receipts. Moreover, some but not all of these foreign churches already receive some financial support from our church's missions budget.

Answer:

IRS Publication 526 addresses this issue as it informs individuals who make contributions to what it calls "Nonqualified Organizations" --

"You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions, including ...

"Foreign organizations other than 1) A U.S. organization that transfers funds to a charitable foreign organization if the U.S. organization controls the use of the funds or if the foreign organization is only an administrative arm of the U.S. organization, or 2) certain Canadian, Israeli, or Mexican charitable organizations."

The Publication addresses item two in greater detail, for readers so inclined to pursue it.

Regarding item one, since the U.S. church (certainly a "qualified organization") is receiving the contributions and then forwarding them to the foreign organization, the members' designated gifts should be deductible. Most churches that I have served are very careful to provide considerable oversight in the use of the funds by foreign organizations. It becomes a matter of Christian stewardship. This is typically the "control" referenced in Publication 526.

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