Skip to main content

Gift Cards in the Offering Plate


Question:

A church received a Visa gift card in the offering.  Is this considered a taxable contribution for the person donating it and, if so, how is it handled? 

Answer:

A gift card is considered the equivalent of cash, so it should be treated in the same way as cash donated to the church. While it is possible to accept gift cards as contributions, the issue lies more with the recording and tracking of the gift, which can be labor intensive.

The value of the gift card will need to be determined since its cost may not equal the face value of the card. Why not? The deductibility of the gift card is based on what the donor actually paid for it rather than the value stated on the card. For example….a simple web search of "gift cards at a discounted price" received more than 12 million hits.

A second complication: After determining the card's value, the gift must be recorded to a separate general ledger asset account where its value could be tracked. Unless the church is able to cash out the gift card, which is uncommon, every time the card is used, accounting staff will need to reduce the value of the gift card asset account with an adjusting journal entry.

Finally, if the church is unable to spend the entire card’s value, it will eventually need to write-off the remaining balance (most likely to a miscellaneous expense account).

All this is based on the idea that the card was given with the intention of being used for general church purposes. However, if the gift was included with a designation, the accounting becomes even a little more involved.

Ultimately, we (MinistryCPA) imagine a church will want to discourage this type of gift, preferring cash contributions. Further, this type of gift does limit flexibility.



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…