Q&A: Do Donor Envelopes Substantiate Contributions?

I recently attended a "tax compliance" seminar for pastors and church bookkeepers. The presenter said that members' charitable contributions are not tax-deductible unless they are submitted in an offering envelope that meets strict requirements. Of course, he offered to sell "compliant" envelopes to the audience for an exorbitant fee. Could you please confirm my understanding that offering envelopes are not required in order for a contribution to be tax-deductible?

In the past, offering envelopes assisted donors in substantiating cash contributions of less than $250. Offering envelopes no longer can be used for this purpose. The tax code now states that all cash contributions, regardless of amount, must be substantiated with:

• a bank record (such as a canceled check);
• a written communication from the charity showing the charity's name, date of the contribution, and the amount of the contribution; or
• payroll deduction records.

Offering envelopes will not satisfy these requirements and cannot be used to substantiate a donor's cash contributions. So, the information you received at the "tax compliance" seminar was wrong and should be disregarded.

Consider the following example. A church member ordinarily contributes cash (in church envelopes and in individual amounts of less than $250) rather than checks. Since the member will have no canceled checks to substantiate her contributions, she must rely upon the periodic receipts provided by her church. If the church does not issue the member a written acknowledgment showing the church's name, date of the contribution, and the amount of the contribution, the member will not be able to deduct any of her cash contributions. The offering envelopes will not suffice.

Even so, many churches use offering envelopes. They have a number of advantages, including the following:

• they help the church connect cash contributions to individual donors;
• they promote privacy in the collecting of contributions;
• they give members the opportunity to designate specific programs or projects;
• they provide members with a weekly reminder of the need to make contributions and honor pledges; and
• they reduce the risk of offering counters pocketing loose bills.