Church Charitable Deduction Denied!
It’s that time again. In addition to the tax statements from employers, banking institutions, and various financial entities — we hear from our favorite charities, and even a statement from our church. The tax laws are very strict when it comes to compliance by employers and corporations. A church or religious organization, however, that does not acknowledge a contribution incurs no penalty, but without a written acknowledgment, the donor cannot claim a tax deduction. Failure to provide the appropriate documentation to its parishioners is [in my personal opinion] an inexcusable omission. The scripture in James 4:17 comes to mind … “ If anyone, then, knows the good they ought to do and doesn’t do it, it is sin for them.” (NIV)
What is the consequence of a church’s failure to go the extra mile? In one court case (David P. Durden, et ux. v. Commissioner, TC Memo 2012-140) the lack of an appropriate document from the church cost the taxpayers additional tax of $7,552 and an accuracy-related penalty of $1,510. In this instance, the IRS rejected the church statement because the acknowledgement did not have a statement indicating whether the taxpayers received goods or services for the money contributed. The second “corrected” statement from the church was also denied because it was not contemporaneous; the statement must be received BEFORE the earlier of the date the original tax return is filed or the extended due date of the tax return.
Okay, enough already, we’re convinced, we want to do what is right! Take a look at the narrative in IRS Publication 1828, Tax Guide for Churches and Religious Organizations, page 24.
“Although it is a donor’s responsibility to obtain a written acknowledgment, a church or religious organization can assist the donor by providing a timely, written statement containing the following information:
- Name of the church or religious organization,
- Date of the contribution,
- Amount of any cash contribution, and
- Description (but not the value) of non-cash contributions.
In addition, the timely, written statement must contain one of the following:
- Statement that no goods or services were provided by the church or religious organization in return for the contribution,
- Statement that goods or services that a church or religious organization provided in return for the contribution consisted entirely of intangible religious benefits, or
- Description and good faith estimate of the value of goods or services other than intangible religious benefits that the church or religious organization provided in return for the contribution.”
As a church or religious organization, we can apply a more favorable scripture from 2 Corinthians 8:21 … “For we are taking pains to do what is right, not only in the eyes of the Lord but also in the eyes of man.” NIV