Skip to main content

Review of Congregation Donations to Staff Members

Question:
A church recently made its congregation aware that they can give personal Christmas gifts to pastoral staff (if they choose), but that members would receive no charitable contribution credit for tax purposes. Is it correct that those personal gifts are not taxable income to the staff members since they don't run through the church records at all, but are simply personal gifts?
Answer:
This assumption is correct.

There are two ways members of a congregation can give gifts to staff members. One involves corporate action and the other involves personal and individual action.

1) The church can take up a collection for staff members. In this case, the contributions are deductible to the donors, but must be reported as income to the staff members since they are deemed payments received from an employer.

2) Church members can give directly to staff members. In these cases, the donations are not deductible to the donors, but the staff members do not have to report the gifts as income. This action cannot be orchestrated as a corporate activity of the church (as the staff members' employer), but rather as the personal choices of individual members to other individuals.

Comments

Popular posts from this blog

Housing Allowance and Form 1099-MISC Reporting

Question:

A church provides its minister a housing allowance, but for other purposes it believes that it must report the full amount of compensation (including the non-taxable housing allowance portion) on Form 1099-MISC (in order to demonstrate the full earnings of the minister). If the church reports his compensation,including the housing allowance, on Form 1099-MISC as taxable income, will he be able to deduct his housing expenses somewhere else on the Form 1040?

Answer:

This questions brings up a couple of issues. First, most ministers are properly classified as employees who receive Form W-2, not as independent contractors who receive Form 1099-MISC. On Form W-2, Box 1 for taxable compensation is reduced reflecting the church's designation of a portion of his pay as non-taxable. Then in Box 14, it typically reports as a memorandum item his additional non-taxable, housing allowance compensation. In the situation addressed in the question, this Form W-2 reporting may or may not a…

Heath Care Sharing Ministries and the SE Insurance Deduction

Question:

Can payments made to a health care sharing ministry (e.g., Samaritan Ministries, Christian Healthcare Ministries) which are exempt from the Affordable Care Act be deducted from income as a self-employed (SE) insurance deduction?

Answer:

First, to be technical, "health care sharing ministries" (IRS exemption D) provide participants an exception from Shared Responsibility Payments (ACA penalties), but don't connote other tax benefits.

Second, a health care share ministry does not qualify as health insurance. One does not pay what the IRS considers to be premiums, but instead shares the health expenses of others. And according to IRS Pub 535, in order for self-employed individuals to qualify for a SE insurance deductions they must be to pay premiums for qualifying health insurance. 


Threat to Tax-Exempt Status? Using Facilities for Profit

Question:

Can a church member conduct piano lessons in her church's auditorium without threatening the loss of the congregation's tax-exempt status?

Answer:

Our answer comes from Matthew Davis, J.D., former attorney with the nationally recognized Christian Law Association, who currently practices law in Wisconsin, Illinois, and Florida.

"As a tax-exempt entity, churches must be careful not only in what activities they engage in directly, but also in how they allow the facilities to be used.

"The primary way in which this can come up relates to the requirement for tax-exempt status that the ministry's activities must relate to its exempt purpose. Assuming the church's exempt purposes are 'religious, charitable, and educational,' (three of the purposes specifically mentioned in the Internal Revenue Code 501(c)(3)), piano lessons would certainly fit within that expectation as 'educational' and therefore not be a problem on the tax-exempt purpose i…