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May a Benevolent (Non-Taxable) Gift Be Given to a Guest Speaker?

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Question: 

A church had a guest speaker fill the pulpit twice during the span of the year. For those two times, the speaker received a total of $1,000 in honorarium ($500 per Sunday). The church issued him a Form 1099-NEC for that amount. 

However, during the course of the year the speaker and his wife encountered substantial hardship. Is it permissible that the church choose to offer assistance to the speaker from its benevolent fund? Will a gift of this nature be taxable income to him?

Answer:

To determine whether the gift is considered taxable income in this case, let's consider the following.

1) The nature of the gift.
            The nature of the gift should be entirely benevolent. If the gift is given to supplement the less than fair value amount paid to the speaker for his services, or with the expectation he will speak again in the future, the gift is considered income and is taxable to the individual. Benevolent disbursements are not considered taxable income to the recipient as long as they are not given as compensation for services rendered to the church. 

2) To whom the gift is given.
            Careful disbursement of benevolent funds helps avoid the appearance of disguised compensation. The best practice is to distribute the funds directly to the need (e.g., a hospital) rather than to the individual. Alternatively, if it is the speaker's wife who was hospitalized and accumulated a large medical bill, the funds may be considered benevolence to her rather than to her husband, again helping to avoid the appearance of disguised compensation to the guest speaker. 

3) The process used by the church to determine benevolent disbursements.
            A system should be in place to ensure that benevolent funds that are disbursed on behalf of employees (or others who provide services to the church) are distributed in a manner identical to that of non-employees. Churches should have a process for members to communicate needs to church leaders. It is good practice for a group or committee of trusted and confidential members/leaders to make wise determinations of need and disbursement. Doing so will protect the church and its leaders from the appearance of favoritism and disguised compensation.

It is permissible for the church to extend a benevolent gift to the guest speaker and his wife. Also, the gift is not considered taxable income for the recipient considering the cautions mentioned above. 

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