Skip to main content

Church Benevolence Fund Disbursements

Question 1:

Can church benevolence funds be given to a non-profit entity on the behalf of a needy individual who is being treated by that entity?

Answer 1:

Yes, as long as the disbursement is not a private enrichment of that individual or entity (the IRS calls it "private inurement"). Care should be particularly exercised if the individual is a church employee.

Question 2:

Can church members or non-members give gifts to the benevolence fund designating an individual as the one to receive the donation?

Answer 2:

Generally, no. The church must be careful to avoid conditions in which it could become a conduit for recharacterizing personal gifts or payments as charitable contributions. My general advice has been that the church can offer to assist the donor of non-deductible gifts in maintaining his or her anonymity, but that it cannot provide a tax deductible receipt.

Having said this, I do believe it is acceptable for the church to announce its corporate decision to support a needy individual and to subsequently take up a collection. I believe that donors can be given deductible receipts in these cases. Care must be taken however, I believe, to avoid situations in which a substantial portion of the collection comes from a source(s) that are otherwise obligated to pay for the needy individual's costs (e.g., a family member donating a large sum to pay for another family member's medical costs).

Of course, members are encouraged to give deductible donations of any size to the benevolence fund as long as there truly are no strings attached.

Comments

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a

Review: Form 1099 Payments to 501(c)(3) Organizations

Question: A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC? Answer: Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC.  The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC: Rent paid to an individual (non-corporation) Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers) Support sent directly to missionaries

Form 944 or 941 Filing for Churches

Question:   A new church filed for an employer identification number (EIN) recently. It received notification from the IRS about the EIN, stating that the church must file Form 944 by the following January deadline. The church has no non-ministerial staff members. Since income tax withholding is elective by ministers and none of the pastors has elected to request non-mandatory withholding is the church required to file Form 944 annually? Also, a quarterly Form 941 (rather than an annual Form 944) is required of some employers. Which IRS form, if any, should be filed? Answer: According to IRS Section 1402(c) and 3121(c), ministers are not subject to mandatory income tax withholding. Unless one or more ministerial employees request non-mandatory withholding, church employers with only ministerial employees do not need to file Form 941 or Form 944.  The IRS  Ministers Audit Technique Guide  explains in further detail a minister's treatments for social security, Medicare tax, Fed