Church and Ministry Q and A – The Many Nuances of Benevolence
Mark Helland, C.P.A.

Mark Helland, CPA is a partner with the public accounting firm Elliott, Dozier and Helland, PC (www.edhcpa.com) which is located in Tulsa, Oklahoma. Mark’s practice focuses on the unique needs of non-profits and he specializes in outsourced accounting, compliance and tax related issues for church and ministry clients across the United States. For further assistance from Mark on these services, Mark can be contacted via email at [email protected] or by phone at (918) 627-2286. You can also connect with Elliott, Dozier and Helland and get updates via social media at Facebook.com/hellandcpa, Linkedin.com/in/hellandcpa and Twitter.com/hellandcpa.

Of the many issues that we help our church and ministry clients with, benevolence is in my view one of the toughest areas to deal with as it is hard to tell if a need is valid or not. It is unfortunate that this area is so difficult to navigate because it is clearly a direct calling of the church by the teachings of the Bible. My title of this article mentions the many “nuances” and clearly this short article won’t be able to cover all of them, for sure, but I will focus on one particular nuance of benevolence.

The nuance of benevolence that I get questions on time and time again is what I will label “directed” benevolence. In other words, a congregation member knows of a needy family and wants to give a donation to the church (could occur in a ministry too but this is less often seen than in the church setting), with the church then giving the money to the family. In effect, the church becomes only a conduit to pass along the donation to an individual or family. The donors in these types of situations, invariably and understandably, always want their donations to be tax deductible as well. Does this situation sound familiar to anyone at this point?  These situations can also be troublesome for a pastor or church leader to deal with because they often involve higher income families that tend to be larger donors to the church or ministry. While being well-intentioned, the donors that make these types of requests are often un-informed as to the legalities of what they are asking you, as a church leader, to do.

On benevolence giving from the church or ministry to the congregation or community, here are some key points to consider:

1. Is the benevolence payment being given to an employee of the church or ministry?
2. Is a congregation member trying to “direct” benevolence to a particular individual or family and get a tax deduction?
3. Is the benevolence payment being given in a non-biased manner?

Regarding point #2, of “directed” benevolence, a church or ministry cannot operate in this manner – i.e. allowing a donor to use the church or ministry as a conduit to direct benevolence to a particular individual or family. If the donor wants to give money directly to an individual or family, (1) this needs to be done between the two families directly OR (2) the church can take the donation from the donor and make the payment to the individual or family, without treating this donation as a tax deductible donation. The church or ministry should only take the actions in (2) if they believe that a valid benevolence need exists though, and that the need meets the standards of the church.

Exceptions exist here though, as churches typically have designated giving programs such as those for single moms, widows, etc. Donors can give to generalized programs with the church then having discretion over which families are blessed through these programs. Also, giving directly to individuals for missions trips is an issue that is a separate issue than the directed benevolence situation mentioned here.

Some additional best practices and ideas on benevolence are as follows:

1. Have a budget for what the church or ministry can afford on a monthly basis for benevolence situations. A benevolence committee that weighs the merits of applications for benevolence is a great idea. A key item in the eyes of the IRS is that they want documentation that there was no relationship between officers and those who were provided benevolence.

2. Benevolence should be for basic needs like clothing, food, medical needs, transportation, etc. I have seen churches give large benevolence gifts for mortgage payments and I guess I am a little bit more skeptical or concerned on gifts of this nature. In other words, it should not be a situation where someone is getting constant monthly support from the Church. That is beyond the scope of what "benevolence" should be.

3. Benevolence gifts to employees are a real problem area. Any payment made to an employee is considered by the IRS to be taxable income, even if for benevolence. Logically, this makes sense – if payments to employees could just be considered “benevolence,” this would be a great way to lower taxable income!

As always, we are here to help with questions in this area. Sometimes it is easier to navigate these types of situations with donors if you can blame the outside CPA for their advice on how to handle certain situations!

 

This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It is shared with the understanding that neither the author nor Tony Cooke Ministries is engaged in rendering legal, accounting, psychological, medical or other professional services. Laws and regulations are continually changing, and can vary according to location and time. No representation is made that the information herein is applicable for all locations and times. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

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