Better get it right in your church's giving acknowledgements

Some of the political discussion these days is on eliminating loopholes to the tax code and thereby raising revenues. Want to read about Richard Land waxing indignant? Try this:

Charitable deduction cap would be 'devastating'

"This [idea of capping the amount of charitable giving that could be deducted by rich folks] would be catastrophic in its impact, particularly on those large gifts that many religious organizations, colleges, universities and ministries, as well as churches, depend upon for continuing operations," Land told Baptist Press Thursday (Nov. 29). "Everything we know from past experience tells us if they cap deductions it will seriously erode charitable giving."

I think Dr. Land also said that the barbarians were at the ecclesiastical gates, churches would die by the thousands, preachers would be begging on the street corners but that did not make it into the Baptist Press article.

But all that is speculation and may not come to pass.

Here is hard reality: If you and your church fails to provide the correct documentation for charitable gifts of any size, then your members may have them disallowed by the IRS.

How about that? You give your money. The church gets it and may even thank you for it but it doesn't count with the IRS unless the church gives you the correct giving acknowledgement.

Donors must receive a contemporaneous acknowledgement along with certain explicit wording. Take it from a CPA who, in this link ( Churches and other NFPs need to send better acknowledgments), covers the case of a donor who lacked the proper explicit wording from the church:

The substantiation requirements for charitable contributions are strict.  How strict ?  Stricter than you probably thought.  You must get a contemporaneous written acknowledgment from the donee for donations over $250. [In another forum someone pointed out to me that the rule is $250 or more, not more than $250].  The acknowledgment needs to detail the value of any ..The acknowledgment needs to detail the value of any goods or services you received in exchange for the donation or explicitly state that you received none (Intangible religous benefits do not count. 

Ticky. Ticky. Ticky, you say?

Costly. Costly. Costly...if your church fails to follow the rules on this.

My state convention says the same thing in this article: 'Church Contribution Credit'

I don't know but would guess that many smaller SBC churches are not providing the necessary documentation to their members for their gifts. I would also speculate that not a few of our church members knowingly or unknowingly are counting as gifts that money paid to their church for books, suppers, study courses, camp fees, etc. Sorry, you don't get to deduct for those fun church camps that cost you so much or for the fried chicken fingers on Wednesday night at the church supper.

Heads up here. You have about a month to straighten out your church's mess on this.

[And I'd bet that most pastors have a story about some church or member working some funny business on giving. Feel free to share it in a comment here.]

Why clergy should lose their tax break

Ordained clergy get a tax break through the housing allowance which allows them to exclude expenses on their home. This is true in the case of an owned home, a rented home, or even if the minister lives in a pastorium.

I'd guess that most SBC clergy, folks who have been known to lay awake at night worrying about a ten dollar bill, are keenly aware of and take advantage of this break. Actually, it's a double break in some cases, since the minister gets a deduction on the interest paid on a mortgage and he gets to deduct that a second time because the part of his compensation used to make those payments is paid as a housing allowance, not taxable as income or included in his W-2.

We don't write tax laws. We certainly need not feel guilty for doing what the law allows. I'm all for paying only the tax I owe and not for paying a dime of tax that I don't owe.

But it may surprise folks to understand that if the minister has two homes, he can even use his vacation home in the mountains or at the beach for the tax break.

Megapastors, Christian music rock stars, and televangelists take notice. You don't have to squeeze your membership or viewers for so much money. Poor taxpaying saps can subsidize your multi-million dollar beach condo.

Phil Driscoll, trumpeter (earlier jailed for tax evasion) can be thanked, or blamed, for that. The case is here. The summary below is from the Georgia Baptist Convention:

Phil Driscoll owns two homes. One in Cleveland Tennessee and a lake home outside of Cleveland Tennessee. Phil Driscoll is an ordained gospel minister. Phil Driscoll Ministries paid for both homes and it was excluded from his income under the Pastor's Housing allowance under Section 107 of the Internal Revenue Code of 1986. The IRS felt that to be a bit greedy and assessed him with additional income and fraud penalties.

Rev. Driscoll took the IRS to tax Court. The IRS argued that the use of the word "home" in Section 107 refers only to one home. Rev. Driscoll countered that in Section 7701(m) the Code provides that singular may include plural. Further, the legislative history did not forbid that interpretation. For those reasons the Tax Court ruled in Driscoll, et ux v. Commissioner, 135 TC 27 (2010) that both houses were homes for the purposes of Section 107 and both could be excluded from income.

This double tax break when expanded to multiple homes, cannot possibly be justified and surely some legislative watchdog will push to amend or repeal it. One can hardly object to that.

What a great country! Some high flying ordained ministers get to have taxpayers subsidize their second homes. We may one day lose this tax break (it isn't exclusive to clergy, military receive it as well) because of how it has been greedily applied.