Why the Church Shouldn’t Be a Middleman for Personal Gifts
A church member wants to give money to an individual or family in the congregation. He asks the church to handle it — maybe for discretion, convenience, or to get a tax deduction. A generous and harmless request? Generous, yes. Harmless? Umm….
To state it clearly: Don’t do it. Giving anonymously to an individual or family through the church is not tax-deductible for the donor. Further, it can put the church’s nonprofit status at risk. Not to mention the administrative overhead.
As a general principle, the church should not receive money from donors who are directing how it should be used. This can become tricky when it comes to benevolence. The church can accept tax-deductible donations for an individual or family only when it has already decided to financially help that person.
The best practice is a general benevolence fund that the church maintains control over. Donor preference for gifts to such a fund can be considered, but to be a tax-deductible gift the church must maintain control of how the donation is used. In other words, donor preference doesn’t have to be honored.
If that’s not enough to encourage you to say no to being the middleman, legal and ethical risks loom large. Laws regulate how churches and nonprofits can use donated funds. Accepting money intended for a specific individual blurs the lines between a charitable donation to the church and a direct gift to a person. This could potentially jeopardize the church’s tax-exempt status.
Assistance, Meet Compliance
There are many ways for people to make anonymous personal gifts. The donor can get a cashier’s check and have someone else pass it along. Crowdfunding platforms like GoFundMe, SpotFund, or GiveSendGo are good options and provide a storytelling avenue that can foster further generosity.
Yet it should be acknowledged that churches have something that these platforms do not: traditions. A church may have a long history of serving as a go-between for congregants who want to help specific families through the church. Changing this mindset can be a big cultural shift. Educating the congregation on the church’s role and limits is worth the effort.
If you’re unsure about the rules, talk to your Auxilio Partner Strategist to ensure compliance and avoid surprises. If you’re not yet an Auxilio client partner, contact us to learn how we can serve your church or faith-based nonprofit and reduce your administrative burden to free you up for ministry.