The issue of how to handle charitable contributions is a good problem for any church to have. It's easy to avoid financial complications arising from contributions if you follow these simple tips.
- You're in charge. The church must approve of a love gift and control how the money is spent for the gift to be considered a charitable contribution.
- Different gifts have different rules. Love gifts are allowed in four specific circumstances. Each type of love gift has its own set of rules determined by the IRS.
- Just say "No." Some gifts, such as land gifts, can be costly or burdensome to maintain. You can decline any gift that you can't use or that has financial risk.
- Be prepared to issue a receipt. The donor may ask for a receipt for tax purposes. The IRS has specific rules about when a receipt is needed and what information should be included.
Endowments are Different
- Endowments are different than gifts. Endowment funds are gifts which require all or a specified portion of the gift be maintained. Typically, the governing board has authority to spend investment proceeds and/or a portion of the original gift.
- Be aware of restricted funds. Endowment donors can dictate a specific use of donated funds. If the restriction becomes unworkable or obsolete, the donor can be contacted to release the restriction.
- Honor fund designations. As long as a church honors the donor's designation for the funds—or plans to do so in the foreseeable future—it typically is not obligated to return the contribution.