Can The Church Give Small Gifts




The question often arises; can the church give gifts to the pastor, the church employees, or its staff members? How about gifts to faithful teachers, hard working volunteers, or to those attending our church for the first time? What should we keep in mind in giving gifts of “Benevolence to the homeless, or even our own church members?” The answer to this question is not a simple one, for we must always keep in mind that your Church’s Articles of Incorporation contain within them [or should have] the following IRS required clause that reads:

The property of this corporation is irrevocably dedicated to religious and charitable purposes and no part of the net income or assets of this corporation shall ever inure to the benefit of any director, officer or member thereof or to the benefit of any private person.”

That means that NO ONE can partake of the income, or the assets of the church, except that they earn them, and the church then files the appropriate IRS reports, and any taxes due, are paid by the recipient.  Something else everyone need to know: Any person having check signing authority, as well as all officers and board members will be held personally responsible if wrongdoing is discovered in this regard. Penalties, fines [yes even prison in extreme cases] can be the result of foolish actions.

Before I give an answer to the primary question, it is important to clearly understand that if “Gifts” are given, and the intent of the gift is to supplement a salary, then that would be classified as “Payment under the table for services rendered.” Permit me give an example of what I mean:

Several years ago, my Wife and I were invited to attend an annual conference of a well known Denomination where, among the many issues discussed and reports given, the Bishop was to be honored. For weeks the District Superintendents had been visiting all the churches in the conference, where they encouraged the churches to give large honorariums to, “Honor the Bishop.”  When it was time for the Bishop to be honored, all the “D.S.’s” lined up to present the gifts they had collected.  Of course, the D.S. that had gathered the largest gift was the first in line, and he received a greater recognition.

HERE IS MY ANALYSIS: If the funds had been channeled through the churches general account, and a check written the Bishop from the churches account, and that sum of monies added to his annual salary – that would be legal. However, if it came directly to him, as certainly it appeared to be the case, the IRS would likely say that this was a contrived and orchestrated event intended to supplement the Bishop’s reportable income, thereby minimizing his taxable income. This is a clear case of, “Payment under the table for Nervices rendered.

CAN we give a special gift to our shepherd, and honor him on his Birthday, Christmas or another very special occasion? It is always  acceptable for the church to give an additional “Gift” on these occasions – just be sure to report that gift along with any and all other salaries/bonuses/perks or extras [such as having an automobile furnished him and or his wife] that the church has “Blessed” him with.

HOW can you give such a gift?  For many years, we did something ‘extra’ for our pastor at Christmastime. Here’s how we did it: Someone in the church [not from within the staff or leadership] would send out a letter to all the members, announcing that we would be giving the pastor a card, along with a monetary gift to show our love for him. Here’s the key to keeping it legal:

  • The member who mailed out the letters:  Used their personal funds for all mailing supplies, and postage expense;
  • All members were encouraged to write out their checks directly to the pastor, or give him cash;
  • Everyone was advised that they would not be receiving a receipt for any gift they might choose to give;
  • In the mailing, all were advised to seek out the member who was collecting the offerings on the 2nd Sunday, and please, do sign the card;
  • And – it was made very clear, that this would be a one time event. It was to be a, “Just cause we love and honor you” gift.

BY-THE-WAY An often used phrase of “Love Offering,” is used. I often hear,  1. “Oh, our pastor doesn’t take a salary, we just give him a ‘love offering.’  OR 2. “Our church members just give the pastor ‘love offerings.’ “Love Offerings are BOGUS!”  There are two distinct issues here. Let me explain:

  1. When the church gives the pastor a ‘love offering,’ [and does not report it as earnings] the IRS would say, “That is simply giving him additional payment under the table for services he has rendered.”
  2. If a church member gives the pastor ‘love offerings,’ that is of no concern or consequence to the church, but it now falls to the pastor to report this as earned income;  And the member will NOT be given a receipt.

Now, lets look at some of the other categories listed above; I will venture my personal opinion here, but I think most CPA’s and tax advisory people would agree with what I am about to say:

Q. Can the church give monies to the “Hurting, the destitute, the homeless, or the church member who is facing some really difficult times? Yes! Once or twice – maybe even a third time – BUT No more than that. And these gifts of “benevolence” really should be on the basis of a well thought out “Benevolence Policy,” adopted in advance by the Board of Directors; Administered by leadership; And the policy must clearly state that no staff member, church employee, the pastor or the pastor’s family can receive “Benevolence gifts.” All gifts should be recorded but it is not required to report them. The records of the “Benevolence Fund” should be included in the annual church audit, and included in the audit report.

Q. Can the church give a small gift to the Sunday School teachers, or other hard working volunteers for their dedicated work? Yes, but “small” [in my opinion] means less than $25.00. A one time gift within the calendar year.

Q. How about “Christmas” gifts, or year end “Bonus” gifts to employees? Yes – but the church must include the gift amount on the employee’s IRS Form W-2, along with his/her salary and the value of any other “perks or extras.”

Q. How about giving gifts to those attending our church for the 1st time. I personally don’t see that as a problem, but again the collective value of the gifts given should not be excessive. Say, a one time gift under $15.00

And finally – “Gifts” of any kind or form should never be in lieu of “Just compensation.” This would be a serious mistake for the church to make. See my on-line article regarding the danger of not properly employing, and paying those who work for the church.  This is what I called A Liability Trap.

Copyright (c) 2010 By Administrative Assistance

 

The above information is provided as a service to the Body of Christ by
ADMINISTRATIVE ASSISTANCE.

We have published a Manual called “SAMPLES” that have more than 100 sample Policies, Minutes, Resolutions and Ratifications. The Sub Title – “OK, you have your corporation, but has anyone ever taught you how to conduct the important business?” Click on – SAMPLES for materials we have written to help you address this, and many other issues.

If you would like more information about similar church administration issues, please consider purchasing “The Church Administration ‘How To’ Manual”, A Disc is included with the purchase of this manual This Manual, is endorsed by three CPA’s, an EA and two attorneys, and was updated in January, 2011, for the 12th time, since its original publication in 1991. Click on – The Church Administration ‘How To’ Manual

Please feel free to call (626) 303-0808 for further dialog on this subject, or any other church admin issue, but do keep the ‘timing’ of any call in mind, as we are on the west coast.

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