According to a new survey published by the Barna Group, 79% of evangelicals have donated money in the past year, compared to 53% of born again non –evangelicals. Of those evangelicals who give, 66% give to their churches and 28% give to other non-profit organizations.
Evangelical Christians are also the faith group that donates the most: 26% donated $2,500 to $5,000, and 6% donated over $10,000. This compares with a national average of 7% and 1% respectively in these amount categories.
So the survey says that evangelicals do in fact donate more than others. Does this surprise you? Would you expect this?
If we follow Jesus’ teaching, we should be the giving the most, because we understand that we have the most to be thankful for in the gift of God’s forgiveness through Jesus’ sacrifice. Plus, we understand that we are to be shrewd stewards of the resources we’ve been given.
A question we should all be asking: “Am I a generous giver regardless of what the survey says?”
I was sitting at a luncheon where Frank Sommerville, a leading nonprofit attorney, was providing an update on legal and tax issues. He brought up a 2012 tax court case where the IRS disallowed contributions in the amount of $25,171 because the church contribution tax receipt didn’t contain the right disclaimer.
In the case, Durden v. Commissioner, U.S Tax Court Memo 2012-140, the IRS disallowed this contribution. The critical disclaimer on the donors’ receipt was missing the phrase, “No goods or services were provided in exchange for these donations except for general religious benefits.” The case went on to say the omission could not be corrected by a new receipt issued after the taxpayers had filed their tax return.
At my church, we changed our software system this past year, but unfortunately the default message on our contribution receipts didn’t include this IRS required disclaimer. So before we printed and sent our year-end receipts, we made sure we changed the wording to include this disclaimer.
How about your ministry? Does your donation receipt contain this disclaimer? If not, your donors’ contributions can be disallowed by the IRS.
Enough said. Okay, time to go check your donation receipts!
Seemingly, we can’t go anywhere without hearing about the looming “fiscal cliff” and various potential consequences of what may happen if Congress doesn’t act. Plus, we don’t know exactly what may come out of last-minute negotiations. So how is this situation impacting donors and their decision to give?
According to the Wall Street Journal, many wealthy Americans have begun to give to donor-advised funds (DAF) at record rates, starting in the third quarter of 2012, to avoid potential increased taxes. By using a DAF, a donor receives the tax deduction at the time of the contribution but can decide how to distribute the funds to qualified nonprofits at a later date. What has been reported is that many wealthy donors may wait until 2013 to distribute donated funds. This may mean greater income coming in the final weeks of 2012 or during 2013 than in prior years. Some evangelical nonprofits have reported seeing bigger gifts than last year.
On the other hand, for many other Americans, the uncertainty is causing fear. Many individuals are afraid to make any move, so they are holding on to what they have and feeling paralyzed by the uncertainty. This, along with continued concern over the growth in the economy, has led many Americans to be cautious with expenditures and giving.
According to a poll conducted by the United Way Worldwide, without charitable tax incentives, 30% of Americans would reduce their charitable donations.
So what are you seeing at your ministry? Have you seen an increase in donations? Are stock donations up? Are some of your faithful year-end donors staying on the sidelines?
It’s the time of year we commonly announce and collect special gifts, often called “love offerings,” for our ministry staff. Proper handling of these gifts can be complex. The IRS has ruled on a number of cases that provide guiding principles for both donors (as to tax deductibility of the gift) and recipients (as to whether the gift should be treated as income).
- If a gift is made directly from a donor to a staff member without any involvement by the organization, the gift would not be tax deductible by the donor and not taxable income for the recipient. The key here is that the funds are strictly a personal gift and don’t constitute compensation. The IRS does limit these gifts to $13,000 annually (rises to $14,000 in 2013).
- If a qualified nonprofit receives a gift for a particular staff member which is not intended for use by the organization, the gift is not tax deductible by the donor. However, the funds distributed to the staff are considered taxable income and should be added to their W-2 wages (for an employee) or reported on Form 1099-MISC (for an independent contractor). Section 102(c)(1)(a) of the IRS Code states that “any amount transferred by or for an employer to, or for the benefit of, an employee is not excludable from gross income as a gift.”
- If a qualified nonprofit preauthorizes a love gift fund for staff and maintains adequate discretion and control over distribution of those funds among the staff, the donations are tax deductible. Again, in this case, the funds distributed to the staff are considered taxable income and added to their W-2 wages or reported on Form 1099-MISC. Adequate discretion and control would include determining the distribution of funds among the staff as well as ensuring that the staff does not receive more than a reasonable amount of compensation through a love gift. For example, if the organization received a gift of $1 million in the love offering fund, it would need to ensure that total compensation did not represent unreasonable compensation for the staff. Most likely this would mean not distributing the entire amount to the staff.
See what I mean about this being a complex issue? “Love offering” sounds so simple, until you read the IRS Code. For this reason, I offer the following fine print:
This post is provided by ECCU for educational purposes only. It is not intended to be legal or accounting advice. ECCU disclaims any liability arising out of your use of, or any financial position taken in reliance on, information provided in this post.