Personalized  Giving Issues     0020-01         ZZall

                                                - - - Rejoice in the Lord always ... again I say Rejoice !!! - - -

                              TO:  Interested Ministries                                                                                             FROM: Jim Bramer, Retired CPA-Auditor 
                                                                                                                                                                          FILE:  0020-01/all

                               RE:  Personalized Giving                                                                                             Originated: September  1980                                         

BACKGROUND

     Questions concerning giving to specific individuals via an Exempt Organization, or "personalized giving", continue to surface. We set forth below our position on these matters, based on our understanding of Federal and State laws.

OPINION

                         The following  issues of tax law must be kept in mind:

  • A gift by one person to another person is NOT a deductible charitable contribution regardless of the need.
  • A contribution to an individual in a qualified Exempt Organization in furtherance of its exempt purpose is deductible within the ceilings currently in effect.
  • The interaction of these principles and their correct interpretation renders the answer to the "personalized giving" question.

       It is mandatory that contributions to an Exempt Organization be under the control of its corporate trustees. The Exempt Organization must not simply act as a "conduit" whereby funds are "passed through, or linked" to an individual as an accommodation to a donor.  Exempt Organization staff members for whom the contribution is directed, where applicable, must be bona fide employees, or equivalent, of the qualified Exempt Organization and subject to its personnel and financial policies.  
         In order to be a deductible charitable contribution, the fund raiser can have no personal equity in the funds; it cannot inure to the private benefit of an individual. The contribution must be to the Exempt Organization for its avowed purpose; which, of course, is primarily carried out by its representatives under the direction and control of its corporate trustees. The contribution must "proceed from detached and disinterested generosity; contain no proprietary selfish interest."

DONOR PREFERENCE

        We recommend that you provide your donors with a copy of your financial policies stating some of the foregoing, and invite the donors to state their preference. We believe the policy should state that seldom will the the requested preference NOT  be honored, but the Exempt Organization's board reserves the right to use the funds where it believes it can best carry out its ministry.

                Comments by type of Exempt Organization follow:

CHURCH (1)

        We are fully aware that many churches are careless in the administration of donor preference, or designated gifts,  and they might be circumventing the "spirit" of these "personalized giving" regulations.
        Every Church Board should carefully determine a  financial policy  with the foregoing principles in mind. We recommend all expenditures of the church be under budget control with a minimum of special purpose gifting. Ideally, donor restricted funds should be limited to those of integrated auxiliaries and/or Board  "set aside"  funds.
        We are of the opinion that, as much as possible, all activities of a church should be included in the annual budget; this includes all registration proceeds for special "outings" and their related expenses.
        We recommend that church members send donations directly to Non Church Ministries (Other Exempt Organizations) as they are so led by the Lord. In our opinion, "passing such items" through the church, defeats the "spirit" of these regulations. If such donations are passed through the church, such contributions are not used for the church's avowed exempt purpose and the church board does not exercise control --  all which are requirements before a church can issue a tax-deductible charitable contribution receipt.
        "Love offerings" given in consideration for services rendered by a church staff member (bonus) or by a special speaker (honorarium) should be properly handled for payroll reporting purposes and, as much as feasible, be within the framework of the church budget.
        We also recommend that the Church have a Benevolent Fund   (Click Here for more specifics)  to help constituents in financial need.  When gracious people want to help a needy family, we recommend that they so indicate this desire when their gift goes to the Benevolent Fund, but they clearly understand that, in compliance with such policies, the Church leadership may or may not use it for the indicated family depending on their assessment of the situation, etc.

MISSION AGENCIES

        Many Missionaries go out and "raise their support", or deputize,  via a personal constituency. It is, therefore, imperative that government regulations be carefully followed as expressed in the foregoing opinion.  Click Here  for more information about the Deputized  program.
        A Mission Agency must have  financial policies  in respect to Missionary Compensation.

SCHOOLS (2)

        Tuition and similar payments are not tax deductible charitable contributions. Schools must be careful about acting as a "conduit" when interested parties want to assist in meeting the needs of a student. A person cannot make a tax-deductible charitable contribution to a school and designate a particular student as beneficiary.
        A school should have a generic Scholarship Fund which accepts contributions and then follows their financial policy in selecting and distributing the contributions to the student beneficiaries.
        The School's  financial policies  should make it clear that a donor can only offer suggestions of known needs, with no promise, implied or otherwise, that the donor's money (that is going to the generic Scholarship Fund) will go to a specific needy student. 
        See above re Benevolent Fund issues at a church since much of the same principles apply when people attempt to direct money to specific students.

CONCLUSION

        Do not permit your special status as an Exempt Organization to be abused with respect to direction of donation income and related matters!

   The bulk of this Publication originated in September 1980 and was   .  UPTD: May 02, 2008  

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     (1) An, Onliner Document, or WRIT (Writing), may be applicable to all Ministries, or it may be designed for just groups like: Evangelical Church, School, Missionary Agency or Organization, Christian Camp / Conference, or other named group.
      (2) WRIT formats include the perspective of   Jim@bcidot.org  via IOMs (Inter-Office Memos) to the Ministry Finance Team (MFTeam); THRDs, a hypothetical Online conversation with members of the MFTeam; GLEANINGS, or Scripture within context of the MFTeam; FWIW; A periodic editorial (For What it is Worth); TRUISM, or believed Ministry Finance principles; and FAQ, response to Frequently Asked Questions