Understanding Church Contributions

Understanding Church Contributions Doug Lohrey Associate Executive Director/CFO Colorado Baptist General Convention

Let’s talk about Contributions

Commercial Helps Church and Nonprofit Organization Tax and Financial Guide by D. Busby Church Law & Tax Report (bimonthly) Church Finance (bimonthly)

Definition of a Charitable Contribution §170 A gift of cash or other property Delivered to church before the close of the year No conditions on payment No personal benefit to the contributor Made “to or for the use of” qualified organization Not in excess of the amounts allowed by law Subject to substantiation

Tax Helps From IRS Charitable Contributions Publication 526

How Do We Safeguard Contributions?

How to receive/deal with an offering Receive the offering Put it in a safe place Not a room where people can play with it Not an unlocked room Needs to be a counting committee Deal with it that day Count it all and give totals to treasurer Deposit right after you count it Give deposit slip to treasurer, as well as supporting documentation She/he should do all the work in the checkbook from deposit slip Pay checks/write Approved by proper people Two signature checks Mail out Do reconciliation of checkbook Present financial statement to church

Let’s distinguish between Designated and General Contributions?

What IS a Designated Contribution? The church must ordain (set-up) the fund. The individual must give to this ordained fund. The individual then receives a contribution credit.

What is NOT a Designated Contribution? The individual cannot just ordain his/her own fund The individual does not get contribution credit in this instance

You could be “laundering” money?

Sample Contribution Policy Gifts to the church designated for the use of a specific individual or individuals are to be discouraged. Such gifts will not be reflected on the donor’s record of contributions. However, gifts designated to the church benevolence fund, administered by the church benevolence committee, will be reflected on the donor’s record of contributions if no “strings” are attached to the gift. The church will accept most types of non-cash gifts such as corporate stocks, land, furniture, clothes, books, art, etc. A letter from the church will be sent to the donor, acknowledging the date of receipt and providing a brief description of the property or items donated. However, the acknowledgement letter will NOT provide an estimated fair market value of the property donated and neither will the donor’s record of contributions reflect receipt of the non-cash gift. To be included in a given year’s record of contributions, the contributions must be received by December 31, or if mailed, the envelope must reflect a postmark no later than December 31. The value of time or services contributed by an individual to the church will not be valued by the church or posted to the donor’s record of contributions. Used by Permission

Sample Contribution Policy - Continued Gifts to the church designated for the use of a specific individual or individuals are to be discouraged. Such gifts will not be reflected on the donor’s record of contributions. However, gifts designated to the church benevolence fund, administered by the church benevolence committee, will be reflected on the donor’s record of contributions if no “strings” are attached to the gift.

Sample Contribution Policy-Continued To be included in a given year’s record of contributions, the contributions must be received by December 31, or if mailed, the envelope must reflect a postmark no later than December 31.

Sample Contribution Policy - Continued The value of time or services contributed by an individual to the church will not be valued by the church or posted to the donor’s record of contributions.

How to Handle Non-Cash Contributions

Sample Contribution Policy - Continued 2. The church will accept most types of non-cash gifts such as corporate stocks, land, furniture, clothes, books, art, etc. A letter from the church will be sent to the donor, acknowledging the date of receipt and providing a brief description of the property or items donated. However, the acknowledgement letter will NOT provide an estimated fair market value of the property donated and neither will the donor’s record of contributions reflect receipt of the non-cash gift.

Sample Contribution Letter for Cash Donation The First Church of Best Town 777 Hopeful Drive Best Town, My State 77888 December 31, 2016 John D. Smith 1234 Main Street Best Town, My State 77777 Dear Mr. Smith We, The First Church of Best Town, would like to acknowledge receipt of your donation. Thank you for supporting the ministries at First Church. Listed below are your gift for tax purposes. Date Gift Purpose 1/7/16 $ 300 Building 3/21/16 500 General 9/9/16 450 Missions $ 1,250 Summary: General $500 Building $300 Missions $450 This donor received no goods, services or other items in exchange for this donation. Sincerely, Pastor Joe Jones Administrator

Sample Contribution Letter for Non-Cash Donation The First Church of Best Town 777 Hopeful Drive Best Town, My State 77888 June 1, 2016    Mrs. John D. Smith 1234 Main Street Best Town, My State 77777 Dear Mrs. Smith We, The First Church, would like to acknowledge receipt of your donation of 1969 Mustang on 3/21/16 . Thank you for supporting the ministries of The First Church. This donor received no goods, services or other items in exchange for this donation. Sincerely, Pastor Joe Jones Administrator

The $250 Substantiation Rule §170(f)(8) The Acknowledgement Must: Be in writing Clearly identify donor by name Give date and amount of each $250 or more donation Describe any non-cash property or “out of pocket” expense with no stated value or amount Provide information on the value of any goods or services (if any) provided by the church in return for the contribution Be furnished “contemporaneously” to the donor

The Vehicle Donation Acknowledgement Rule Effective January 1, 2005 Applies to donation of cars, boats, and aircraft valued over $500 General Rule – Donors deduction is limited to gross proceeds from sale by church

The Vehicle Donation Acknowledgement Rule Exceptions to General Rule Allows donor to claim fair market value of vehicle, even if: Church gives the vehicle to needy individual Church sells the vehicle to a needy individual at a significantly below-market price Church makes significant intervening use of the vehicle prior to sale Church makes material improvement to the vehicle prior to sale

The Property Disposition Rule – §6050L Applies to Disposition of Donated Non-Cash Property (except publicly traded stock) valued at $5,000 or more Sold or Exchanged Within 3 years of receipt Form 8282 due to IRS within 125 days of disposition – copy to donor For the donor to get tax credit, a church employee must sign the 8283

Questions? Doug Lohrey dlohrey@cbgc.org If you have any questions, please call me. Doug Lohrey 888-771-2480 ext. 224 dlohrey@cbgc.org