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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.



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