Private Letter Ruling 9733015
Background. Every church has received contributions designating a specific project or use. It is important for church treasurers to understand the tax implications of such gifts. Are they tax-deductible? Should the church issue the donor a receipt acknowledging the contribution? Can the donor claim a tax deduction on his or her tax return? A recent IRS ruling addresses this important topic. While the case involved a university, it is directly relevant to churches.
Facts. A university owned several fraternity houses. Over the past several years, the physical condition of the fraternity houses declined to such an extent that student safety was jeopardized. As a result, university officials launched a fund-raising drive to help finance the cost of reconstructing and remodeling the fraternity houses. Donors were encouraged to contribute for the renovation of a specific fraternity house, and the university assured donors that it would "attempt" to honor their designations. However, the university made it clear to donors that it accepted their designated gifts with the understanding that the designations would not restrict or limit the university's full control over the contributions, and that the university could use the designated contributions for any purpose.