Church Benevolence Funds – A Great Way to Give

We all love to give. We may not always feel we have the resources to give, but I haven’t met anyone who doesn’t love the way giving makes them feel. 

As Christians, most of us do not want to take credit for our giving. This is because the Bible tells us not to (Matthew 6:1) and because being seen as the source of the gift can cause problems. If the receiver sees us as the source, they don’t give credit to God, but to us. Being seen as the giver can also create an unhealthy dependence. 

So, how can we give to those in need while avoiding these problems? 

Church Benevolence funds can be a solution. Benevolence funds are created by the church’s governing body and administered by a committee of the church. The church should have a written policy governing the administration of the fund. The policy must define the “charitable class” that will be eligible to benefit from the fund. The class must be broad enough that it is indefinite in size. The class cannot be so small that the church can list the potential beneficiaries by name. The ill, poor and distressed are classes that a church would typically care for. The idea is to make sure the fund cannot be created to serve a defined group of people.

Page 9 of IRS Pub 3833 states that a charitable class must be large enough or sufficiently indefinite that the community as a whole, rather than a pre-selected group of people, benefits when a charity provides assistance. 

An example of goofing this up can be found in Private Letter Ruling 201205011. In that ruling, the IRS denied exempt status to a nonprofit formed to aid children with special needs becauses all of the children being served belonged to the same family. 

Further, the policy must define the types of needs that the benevolence fund can pay. Examples are food, shelter, clothing, transportation and medical expenses. The policy should also outline the process that an applicant must follow to apply for assistance. 

Contributions to benevolence funds can be tax deductible if they are not earmarked for a particular individual. Gifts earmarked for an individual are considered gifts to the individual, not the church. Rev. Ruling 62-113 states that the test is whether the organization has full control of the donated funds. Rev. Ruling 79-81 denied a charitable contribution because deductibility requires both full control by the charity and intent by the donor to benefit the charity itself and not a particular recipient.

“Designating” donations area can be tricky. The key is that the charity cannot be seen as a conduit for giving money to an individual. 

What if I want to raise funds for an individual?

In 2019, an individual can give up to $15,000 to any individual tax free. Transfers to your spouse are not subject to gift taxes so you can work together to give up to $30,000 yearly to an individual. If you go over those limits, you’ll need to file a gift tax return and use up some of your lifetime exclusion. In 2019, that amount is $11,400,000. 

Your church can help your effort by accepting donations for the individual. The church’s involvement could add some credibility to your cause and make sure the funds are well taken care of. If the donations are made for the benefit of an individual, the donations are not tax deductible and are subject to the IRS rules mentioned above. The church should clearly mark the checks as non-deductible and make sure the donations do not end up on anyone’s year end gifting statements. 

If you decide to go it alone and collect the checks yourself keep great records! Have a separate bank account set up and note where every dollar goes. Know that any interest earned will be subject to taxes and the bank will credit that income to whoever’s name is on the account. 

Doing a good deed is never as easy as it should be, but I hope this helps you get it right!

Disclaimer: This article is not intended as tax or legal advice. Please contact your tax professional to discuss your situation. 

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