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Refunds of Charitable Contributions
Refunds of Charitable Contributions
What do we do if a member wants to take back their contribution?
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A church member donates $2,000 to her church during the first six months of the year. She then becomes upset with the pastor and begins attending another church. She contacts the business administrator of her former church and demands a refund of all the contributions she made earlier in the year. How should the administrator respond?

Start by testing your knowledge. Then read on for a summary of this topic.

  1. Donors generally have the right to demand a refund of contributions they make to a church, if they do so within the same year as the contribution.
    True or False
  2. While a church may not be legally required to refund donors' contributions in most cases, it is a good practice to do so.
    True or False
  3. A donor makes undesignated contributions to the church throughout the year amounting to $5,000. She becomes upset with the church leadership, and begins attending another church. She asks to have her contributions for that year refunded so she can donate them to the church she presently is attending. The church is not legally required to comply with this request.
    True or False
  4. A church creates a building fund to finance the construction of a new building. Over a 3-year period it receives contributions of $100,000 that are designated for this fund. The church can identify every donor who made a contribution to the fund, and the amount of each contribution. The church decides to abandon the building program. It should ask donors to the fund if they want their contributions returned, or if they want to redesignate them for another purpose.
    True or False
  5. Matt donated $5,000 to a church project last year, and deducted this amount on his tax return. This year, the church abandons the project, and Matt asks that his contribution be returned. If the church complies with this request, it should inform Matt that he will need to file an amended tax return for the previous year so that the deduction he claimed can be eliminated.
    True or False

Sometimes donors ask for a refund of specified contributions. For example, John donates $10,000 to the church building fund, and the church board votes to abandon the building project later that year. John asks the church business administrator to refund his $10,000. Or, a family quits attending Church A midway through the year, and begins attending Church B. The family asks the church business administrator of Church A for a refund of all of their contributions. How should these requests be handled?

Answering these kinds of questions begins with an understanding of the fact that a charitable contribution is a gift, and, like any gift, is an irrevocable transfer of a donor's entire interest in the donated cash or property. Since the donor's entire interest in the donated property is transferred, it generally is impossible for the donor to recover the donated property. As we will see, there are a few exceptions to this general rule.

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Posted:
April 23, 2009