Recent Developments

Issues that affect ministers and churches
Charitable Contributions - Part 1

The United States Supreme Court has remarked that a charitable contribution is in essence "a transfer of money or property [to a charity] … in excess of any benefit received in return." Accordingly, a charitable contribution is deductible "only if and to the extent it exceeds the market value of the benefit received" and "only if the excess payment was made with the intention of making a gift." Based on this language, a donor may deduct "contributions" to a church school attended by his or her child only to the extent that the contribution exceeds the fair market value of the child's tuition. Similarly, a "contribution" for which a donor receives a premium (e.g., a Bible, record, book) is deductible only to the extent it exceeds the value of the premium. But what about contributions to a church? Could it not be argued that they are nondeductible since the donor receives substantial services in return (worship services, sacraments, sermons, hospital calls, counseling, etc.)? This fascinating question was recently presented to a federal court of appeals. In affirming the deductibility of charitable contributions to churches, the court relied on the following two considerations: (1) how could a court or the IRS ever place a value on the benefits and services associated with church membership; and (2) any attempt to do so would involve an "excessive entanglement" between church and state in violation of the first amendment's nonestablishment of religion clause. Hernandez v. Commissioner, 819 F.2d 1212 (1st Cir. 1987).

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Posted: July 1, 1987
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