September 08, 2016

Mission Board Collecting Donations for Ministers' Mission Trips

Question:

If a mission board is receiving monies for an ordained minister from his friends and family in order to fund his mission trip, are those contributions deductible for the donors? Are the monies received by the ordained minister excluded from taxable income?


Answer:


Donor side: The contributions may be deductible for the donors. According to Richard R. Hammar in this book 2015 Church and Clergy Tax Guide, "IF a donor stipulates that a contribution be spent on a designated individual, no deduction ordinarily is allowed unless the church exercises full administrative control over the donated funds to ensure that they are being spent in furtherance of the church's exempt purposes. To illustrate, contributions to a church or missions agency for the benefit of a particular missionary may be tax deductible if the church or missions agency exercises full administrative and accounting control over the contributions and ensures that they are spent in furtherance of the church's mission" (p. 384-385). Each mission board is responsible to establish policies and procedures to assure that donors of charitable contributions receive documentation consistent with IRS regulations.

Recipient side: The exclusion from taxable income for ministry trip expense reimbursements received by the minister depends on whether he has set up a reimbursement plan with the mission board. According to IRS Publication 463, "A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses." If the minister has documentation for his trip related expenses, the board will reimburse the minister with the funds set aside for him. If he does not keep records of his trip related expenses, the money given to him will be taxable income and the agency will be responsible to issue him the appropriate information return (e.g., Form W-2 or Form 1099-MISC).

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