Churches and the 1993 Tax Law Changes

By Sherrel A. Mercer

A Christian will endeavor to give cheerfully and responsibly to the local church of which he is a member. His conscience will be his sole guide, both in the gift he makes, and in his reporting of his annual contribution as a deduction. No other party is involved, since churches of Christ, in adhering to scriptural standards, normally have no direct accountability to the Internal Revenue Service concerning the contribution received from their members.

It is fitting and proper for a Christian to claim his correct itemized deduction for religious contributions. By so doing, the wages he earns will have its greatest value, since more of it will be available to do good works. But some individuals have abused the privilege of giving, and as a result, new IRS regulations effective in 1994 will require a change in the way churches handle the contribution received from members.

Effective January 1, any contribution of $250.00 or more to a church will be excluded from the IRS as a deduction unless a signed receipt is obtained from the receiving church. A cancelled check will no longer be sufficient to substantiate such contribution, and the testimony of knowledgeable individuals will not be accepted! In addition, if a group of checks, each of which is less than $250, is given on the same day, the deduction for those checks will be excluded if no receipt is obtained.

The vast majority of contributions in support of churches of Christ are under $250 each. But consider these scenarios that do regularly happen:

1. A family takes a four-week vacation, and provides the contribution for four Sundays on the last Sunday before they leave. The parents regularly contribute $75 each week. The contribution for the four weeks together amounts to $300. Their contribution will be disallowed by the IRS if a receipt is not obtained.

2. A sizeable gift is made to the congregation in memory of a departed member. If $250 or more, the contribution will be disallowed by the IRS if a receipt is not obtained.

The new law places no responsibility on churches, but rather on individuals who make gifts of $250 or more. But clearly, churches must make adjustments in how they handle the offering in order to assist members in preserving their privilege under the tax law. And the adjustments need to maintain the privacy of the offering in order to be consistent with the scripture.

The IRS is seeking to prevent, for example, a person from writing a check of $300 to a church, and then receiving $250 in change from the collection plate. Such a person in the past could declare the $300 as contribution, when in reality his gift was only $50. (This actually was happening!) Since churches are not accountable to the IRS, no one was the wiser.

In 1994, it will be important for churches to put in practice one or more of the following changes:

1. The persons who count the contribution must be pre-pared to issue a signed receipt to anyone who gives $250 or more on any occasion. The receipt must include the name of the church, the date received, and a statement that no goods or services other than intangible religious benefit was received by the giver in exchange for his offering. The receipt must be signed. Or,

2. The endorsement stamp used on the back of personal checks could be worded as above to make the endorsement a valid receipt when signed. For example, it could say: “This check was received by the Any town Church of Christ as contribution on (date). The donor received no goods for services other than intangible religious benefit for his gift. Deposit to account number 123456 of the Hometown Bank. Signed

3. In addition, as additional protection of the rights of the giver, my advisors say that the one who signs the receipt or the receipt stamp should not be a close relative of the one who issues the check.

4. Finally, these changes need to be explained to the members of the congregation, so that there will be no surprises if someone is audited by the IRS.

The rules seem to indicate that the receipt could be given at a later time, so long as the receipt is in hand by the time a person files his personal income tax return.

A local congregation could choose to do nothing in preparation for these changes, and hope that the need for a receipt will not arise. That seems tantamount to hoping a large contribution will never arrive! Brethren, leadership demands that those in positions of responsibility initiate actions that serve to defend against undue criticism.

We are fortunate to live in a great country which allows churches to function without monitoring or interference from the government. There are forces at work that will, I am sure, make many more changes in the way churches function in the next twenty years. The 1994 changes seem to be reasonable, but churches must respond in order to assist their members to be the best possible stewards of the funds they possess.

(Information is from the RIA Analysis of the 1993 Federal Law Changes.) GI

Guardian of Truth XXXVIII: 1, p. 14
January 6, 1994