A New Vision, A New Voice ~ The North Texas Conference
The sad tale of the Durdens and their disallowed charitable contribution
By JODI SMITH
Director of Connectional Resources
My goal in this column is to provide our local churches with concise information on protecting your ministry. This month, the focus is on the due diligence of the church in receiving charitable gifts.
Although we give first from our love for God and the church, we have come to expect the benefits of a tax deduction at year-end as well. The Internal Revenue Service has certain requirements that must be met for the donation to qualify for the charitable contribution deduction.
To qualify for the deduction, our churches need to provide each donor with a simple year-end statement that includes the following sentence: “Goods and services provided in consideration for these donations consisted solely of intangible religious benefits.”
The impact of not including this statement is shown in the case of Durden vs. Commissioner.
In 2007, the Durden family claimed a charitable contribution deduction of $22,517 for cash given to their church. Most of their individual contributions exceeded $250. Upon questioning by the IRS, the Durdens produced a letter from their church acknowledging the contributions, as well as canceled checks supporting the amounts of the claimed deduction.
The IRS declined to accept the church’s acknowledgment of the contributions on the grounds that it did not contain the required statement under Sec. 170, which states: “For donations of $250 or more … the donor must obtain a contemporaneous written acknowledgment … stating the amount of the contribution [and] whether the donee provided goods or services in consideration for the donation. … If goods or services received consist solely of intangible religious benefits, the contemporaneous documentation must contain a statement to that effect.”
The Durdens subsequently obtained a second written acknowledgment from their church with the required language. The IRS and the Tax Court disregarded it because it did not fulfill the “contemporaneous” written acknowledgment requirement. So the Durdens had to pay about $7,500 in additional taxes because they were unlucky enough to get singled out for an audit, and their church treasurer failed to conform with this stipulation of the tax code.
I encourage each congregation to review the statement of giving provided to donors to make certain this statement is included in the body of the text. It is a simple step with potentially major implications for those who give of their hard-earned dollars to the ministry of their beloved church. I pray we all honor these gifts with due diligence and thanksgiving.