Stock Donations

Likely because of our current economy, we have had an increasing number of requests to make stock donations to churches. If you’re interested in setting up an account to receive stock donations, just contact us and let us know! Here is a great write-up that will help understand the benefits of this type of donation.

Why give stock?

There are significant tax advantages in giving appreciated stock held for more than one year. The donor may take the full fair market value of the stock gift as a charitable deduction on his or her income taxes and neither the donor nor the church has to pay the long-term capital gains tax, which is 15% of the net appreciation of the stock.

The maximum deduction you may take within a given tax year is 30 percent of your adjusted gross income. If you are unable to take the entire deduction in one year, you may carry the excess deduction forward for five additional years. The long-term capital gains tax rate is reduced to 5% for those in the 10 percent tax bracket.
Illustration between 1) selling appreciated stock first and then giving the proceeds and 2) giving appreciated stock outright:

Sell First vs. Giving Stock

Market Value                                      $15,000           $15,000
Hypothetical Cost Basis                      ($5,000)           ($5,000)
Gain                                                    $10,000            $10,000
Capital Gains Tax (Assuming 15%)      $1,500              $0.00
After Tax Proceeds to Church             $13,500            $15,000
Donor’s Charitable Deductions           $13,500            $15,000

So, what about online giving?

In recording tithes and offerings for churches (I’m a bookkeeper), I’ve started to ponder the whole giving electronically thing (or e-tithing). I thought I’d bring the discussion to the Ps20 world in hopes that some pastor or wise lay man or woman could settle the issue and I can go on my merry way.

In the spirit of full disclosure (yes, I know I am supposed to give in secret), I tithe electronically. I like the ease of it, the convenience, the consistency, the no-brainer aspect. I don’t have to wriggle in my seat as the offering plate (or bucket in my case) approaches and think about the clothing purchase I made earlier this week and start bargaining, “God, how about $50 less for your Kingdom?” (In case there was any doubt, I am not a saint and still need to practice the Give-Save-Spend mantra.) The tithing exercise has turned into an annuity, coming straight out of the bank account, as any other bill would, before I get my oftentimes greedy hands on it. Obviously, churches aren’t complaining about this. Churches love consistent giving, without which forecasting is nearly impossible. When church attenders go out of town on a summer vacation, for example, roughly forty percent of those contributions missed are not made up. So giving through systematic electronic withdrawals appears to be the solution from the church’s perspective.

But what about from the heart of the giver? Does giving my first fruits offering electronically impact my heart the same way? After all, if I give without love, “it profits me nothing” (1 Cor. 13:13). Does electronic giving depersonalize tithing the same way an email letter depersonalizes a hand-written one? Am I bringing my tithe and offering to the church as an act of worship and obedience or is this just Old Testament rigmarole (I love that word, regardless of whether I am using it correctly)? Crown Ministries teaches that giving should be premeditated, that to know the full joy and reap the blessing of giving, it must not be done carelessly. Does e-tithing lead to careless giving more so than writing a manual check? When the offering plate goes by and I physically place something in it, do I more consciously remember that I am giving back to the Lord Himself? An electronic debit on my bank statement doesn’t seem to move my spirit in the same way. Is there a conscious (or subconscious) surrender of possessions when I participate in the Sunday offering or snail mail a check in to my church? Or am I missing the point altogether?

In wrestling with this whole thing, I am coming to understand that giving (whether it’s time or money) boils down to a heart issue. Am I giving, electronically or otherwise, with a heart of love? Am I positioned to reap the benefits and blessings that the Lord wants to bestow on me as the giver? Am I being stretched beyond my tithe? Is the tithe the starting point of my giving and not the limit? These are the questions that impact my selfish heart and more closely align it with Christ. Perhaps for me, a manual check would be better, but for others, giving electronically accomplishes the same mission in self and Christ-awareness: my heart follows my treasure (Matt. 6:21).

So, any thoughts out there? Should I buck the modernized e-tithe system and return to a pen and checkbook like my grandmother? Does it matter or am I splitting hairs? Is ‘obedience’ obedience regardless of how I arrive there, emotionless or not? Feedback, anyone?

Raising Salary Support

When a church is getting started, income is low and expenses are high, so it is common that staff members must be responsible for raising their salaries.

This can get complicated because it is illegal for churches to raise donations that are earmarked for a specific person.

The best way to raise salary support is for each pastor to set a goal for fundraising. The church should then set a salary based on a percentage of what the pastor is projecting to raise. In other words, the pastor is a W-2 employee with a salary set at 80% (for example) of his fundraising goal.

If the pastor reaches his fundraising goal three months in a row, the church can give him a bonus. If he does not reach his goal three months in a row, the fundraising goal and the salary percentage can be re-evaluated.

The church must commit to paying the salary whether the funds are raised or not. If the salary needs to be adjusted, it must be a decision made by the church board.

The donations received from the pastor’s fundraising should be marked as “fundraising” and should not have the pastor’s name on them.

How To Do a Capital Project

Entering into a capital project can be a challenging process.  However, there are a few guidelines that will help make the process much smoother.

  • Define the project in scope.

  • Determine the cost which will result in a project budget.

  • Decide how to fund the budget.

    • Funds can be raised prior to starting the project.

    • Pledges can be taken and funds received over time.

    • Debt can be used if the church or organization determines this is appropriate and the desired source of funding.

  • Once funds are secured, track the actual costs and stay within the budget to avoid overruns.

We highly recommend working with an outside organization who specialized in capital projects and generosity.

How do we track designated restricted funds?

Gifts given to designated funds and their subsequent disbursements are tracked on the Balance Sheet as Current Liabilities.  Gifts received are credited to the donor as tax deductible and are recorded to the Fund as an increase to the liability.  Payments made out of the fund are recorded as a decrease to the liability.  A current balance on the fund can be determined at any time by viewing the balance shown on the Balance Sheet.

Sometimes there are circumstances where the organization would prefer seeing the disbursement activity on the Profit & Loss Statement as a record of spending so they can compare it to their budget.  An example of this would be for a Building Fund and the expenses associated with construction or remodeling.  In this scenario, an adjustment would then be made at month-end to offset the building project expenses on the Profit & Loss and reduce the Building Fund on the Balance Sheet.

In the absence of a Benevolence Policy or Mission Fund Policy, gifts marked for these ministry areas are treated as “preferenced” and are recorded as an offset to the expense lines for those ministries, reducing the total spending from General Fund/Operating monies.

Likewise, gifts given to the “Children’s Ministry” are recorded as an offset to the expenses for the Children’s Ministry.

Registration fees for camps and special events are recorded as an offset to expenses on a separate line “Proceeds from Events” within the applicable ministry expense grouping.

Deductibility of Donations

Regular Giving

Generally, anything dropped in the offering plate, mailed in, donated online, cash in an envelope, etc. is a tax deductible donation.

Restricted gifts vs. gifts with preference

The idea of a charitable contribution deduction is that the donor is relinquishing or giving funds / assets to a qualified charity who then has full discretion and control over those funds. A donor’s stipulation on how the funds are to be used may cause the gift to be non-deductible if it limits or removes the church discretion and control of the fund or if the funds are earmarked for a specific individual. Let’s look at some examples. A gift that is designated for a building fund or a specific church project is called a restricted gift and the church must use the funds according to the designation. This type of gift is tax deductible to the donor because the church still has full discretion and control of the funds even though it is restricted to a specific use. A gift designated to be paid to an individual is problematic as this type of restriction results is non-deductible by the donor. The church should not act as a “conduit” for funds to be transferred between individuals as those types of gifts are non-deductible by the donor (more on this subject under the Love Offering section below). The last example would be a gift with a donor preference that the funds be used for a program or specific ministry while acknowledging that the church has full discretion to use the funds as determined appropriate. This type of donor’s preference communicates a desire or suggestion for the use of the funds as opposed to a mandate for the use of the funds. This type of suggested use of the gift is fully tax deductible by the donor.

Salary Support

When a church is getting started, income is low and expenses are high, so staff members are commonly responsible to fundraise their salaries.  This can get complicated though, since it’s illegal for churches to raise donations that are earmarked for an individual.

We recommend this strategy as the best way to raise salary support:  each pastor should set a goal for fundraising, and then church should then set a salary based on a percentage of what the pastor is projecting to raise.

In other words, the pastor is a W-2 employee with a salary set at 80% (for example) of his fundraising goal.

If the pastor reaches his fundraising goal three months in a row, the church can give him a bonus. If he does not reach his goal three months in a row, then the fundraising goal and the salary percentage can be re-evaluated.

These donations should be marked as “Salary Support” and should not have the pastor’s name on them.

The church must commit to pay the salary whether the funds are raised or not. The church board must decide if and when the salary needs to be adjusted.

Love Offerings

Typically, when donor’s give love offerings, they have an intended specific recipient in mind. Because the gift is given with the intention of the gift benefiting a specific individual, the gift is not tax deductible.  Further, the gift is taxable income for the recipient. There are exceptions, however. In the case of a “love offering” for distribution among multiple staff members, if leadership is determining the specific recipients and the allocation of funds between the recipients, then donations to that love offering fund are tax deductible.  Payment of the love offering is taxable income and subject to IRS reporting.

Missions Trips

All monies donated to missions trips are considered tax deductible donations.  However, it is imperative that the church publish, in the fundraising documents, a statement saying that any monies not used for the trip will be released into unrestricted income for the church to use at their discretion.  Some churches say that any monies not used for this trip will be released to the missions budget.  Whichever way you choose, it’s important to know that if this statement is not included in the fundraising documents, then the donation is restricted and can only be used for that trip or it has to be refunded to the donor.