How should my church properly document contributions?


January 02, 2013

As I wrote this column during the first week of December, the weather forecast included the first significant snowfall of the year in the Twin Cities. I suspect that as you read this in January, you will be tired of shoveling snow, wondering how we can drop the weight we gained from too many Christmas cookies, and maybe even feeling a bit let down at the end of the Christmas season.

Here is my disclaimer: this column may not lift your spirits and it definitely won’t help you lose weight.

Many churches receive a significant portion of their offerings in December. (I guess that is uplifting news because it indicates that people are generous.) Along with gifts of cash, folks often give gifts out of accumulated assets. Sometimes these are gifts of stock, grain, or even things like coin collections. Documenting these gifts can be complex, depending on the type of gift and the amount given.

It is very important that churches provide documentation that meets Internal Revenue Service requirements so that your donors can use the full charitable contribution deduction they are entitled to take on their taxes. The rules for documenting charitable contributions are complicated, with different types of documentation required for different levels of gifts. This column is much too short to include all the requirements, but we have included some of them in the Church Finance and Administration Notes provided with your monthly remittance statement—also available at minnesotaumc.org/resources/finance-center.

Here is just one requirement. Its importance was highlighted in a recent court case. Every contribution acknowledgement must contain a statement to the effect that the donor did not receive any tangible goods in exchange for the donation. Here is a phrase you can use: “Thank you for your contribution of $251 that [Your UMC] received on December 30, 2012. No goods or services were provided in exchange for your contribution, other than intangible religious benefits.” If someone made a donation at a fund-raiser, such as the annual chicken dinner, you would need to provide an estimated value of the dinner in the acknowledgement. Your contribution statement could say: “Thank you for your cash contribution of $100 that Main Street UMC received on Nov. 17, 2012. In exchange for your contribution, you received a chicken dinner with an estimated fair-market value of $10.”

There are some resources that describe the appropriate documentation for charitable contributions. Please see IRS publication 526 Charitable Contributions and publication 1771 Charitable Contributions: Substantiation and Disclosure. Both are available online at www.irs.gov. I also recommend the most recent Church and Clergy Tax Guide (updated annually) by Richard Hammar, available at www.YourChurchResources.com, or you may borrow a copy from the Resource Center for Churches, (612) 870-0861.

The task of documenting contributions can seem like sheer drudgery. It might encourage you to remember that United Methodists are incredibly generous, giving at Christmas and year-round to meet the needs of folks affected by natural disasters or by killer diseases and those without basic needs such as clean water, food, housing, and education. The recipients of those gifts, such as churches and charitable organizations, have the responsibility exercise stewardship in receiving, accounting for, and documenting those generous gifts. As you work on contribution statements, say a prayer of thanks for the generosity of each person and family and for God’s greatest gift to us: the wonder of the Christ child come to live among us at Christmas.

Barbara Carroll is director of finance and administration for the Minnesota Annual Conference.




Minnesota Annual Conference of the United Methodist Church

122 West Franklin Avenue, Suite 400 Minneapolis, MN 55404

info@minnesotaumc.org

(612) 870-0058