Skip to main content

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.

Comments

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a

Review: Form 1099 Payments to 501(c)(3) Organizations

Question: A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC? Answer: Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC.  The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC: Rent paid to an individual (non-corporation) Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers) Support sent directly to missionaries

Form 944 or 941 Filing for Churches

Question:   A new church filed for an employer identification number (EIN) recently. It received notification from the IRS about the EIN, stating that the church must file Form 944 by the following January deadline. The church has no non-ministerial staff members. Since income tax withholding is elective by ministers and none of the pastors has elected to request non-mandatory withholding is the church required to file Form 944 annually? Also, a quarterly Form 941 (rather than an annual Form 944) is required of some employers. Which IRS form, if any, should be filed? Answer: According to IRS Section 1402(c) and 3121(c), ministers are not subject to mandatory income tax withholding. Unless one or more ministerial employees request non-mandatory withholding, church employers with only ministerial employees do not need to file Form 941 or Form 944.  The IRS  Ministers Audit Technique Guide  explains in further detail a minister's treatments for social security, Medicare tax, Fed