Benevolence Extended to Employee: Taxable?

Question:

My church set up an adoption fund to help members that are willing to adopt children. Two of the members that have answered this call are church employees, one is an administrative employee and the other is a pastor. Are funds paid out of this fund taxable to the employee?

Answer:

Benevolent activities of the church may benefit members of the church or community who are also employees as long as they are not disguised forms of compensation. Benevolent disbursements are not considered taxable income to the recipient since they are not compensation for services rendered to the church. The church should establish clear parameters for eligibility to receive benevolence; employment status with the church must not influence the procedures for receipt of benevolence.

The members of my Federal Taxation I class at Maranatha Baptist Bible College in Watertown, Wisconsin have taken on the challenge of study and research to answer posted questions. Julia Doerstling of Lantana, Texas contributed to this posting.

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MinistryCPA - Corey A. Pfaffe, CPA, LLC

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