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Thursday, April 13, 2006

Handling Designated Contributions to Your Church

Dollars“Designated contributions” which include love offerings, too, are contributions made to a church with the stipulation the donations are used for a specified purpose. As a general principle, a donor can receive a charitable contribution credit from the church if the church handles the designated contribution properly.

Designated funds cannot be spent on unintended purposes unless a prior written agreement has been established by the church. Without a prior written agreement in the church documents, legally, the only way a church can change the purpose of a designated donation is by court order. If the cash donation is for an approved project or ministry of the church and the designated fund has been established, the cash donation can be recorded on the donor’s contribution statement.

Designated funds created before the church adopts a new written church policy will not be impacted by the new policy. The church must operate under the original terms (verbal or written) that were assumed when the existing designated funds were established. The new written church policy will impact only new designated funds created after the policy is approved by the church.

Contributions designated to a group or organization within the church (i.e. Sunday school class) for the organization’s exclusive use and under its total control is not a deductible contribution to the church. (The class is not a 501(c)(3) organization.) The church cannot add the designated contribution to the donor’s contribution statement because the church does not have any control over the contribution.

[by Keith Hamilton; from Lifeway.com.  You can download Keith's four page report on designated contributions here.]

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April 13, 2006 in Church Finances | Permalink

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Comments

Definitely passing this article on to several! Very timely indeed.. Thanks, Todd.

Posted by: Camey | Apr 13, 2006 11:26:37 AM

We've just written a policy on this to keep it from becoming a problem. (like... No memorial gifts with strings attached... stuff like that...)

We do have a "Vision To Build" fund, that is specifically for growth and expansion, but nothing else.

This brings up something that has always been a sticking point for me, even before I ever served in a church. It gets my goat when people ask me (it's happened a couple times) if I know of any pet ministries that they should specify their big end-of-year giving for. I always tell them, "Trust your leadership, let them decide..."

Posted by: Peter Hamm | Apr 13, 2006 11:56:16 AM

In the church I was recently serving... Our church coucil was required by the BY-LAWS to approve the receipt of all large gifts or "special funds."
This policy required leadership to invite the giver to have a conversation with church leaders at which time their desires for the gift were heard and evaluated and they were made aware of whether their gift seemed "too direct."
In my nine years there, every conversation that I am aware of with 'givers' was well received, and the bottom line always came to a situation where the giver expressed trust in the church leadership to use it as they felt best.
From that process, ALMOST every gift did go to a use where the original intent was honored, because the leadership sought to honor the intention of the giver within the vision of the church structure. Other givers would hear the leadership's concerns and give their blessing to use the funds or items in a way different than their original intention.
This became one of "THE VERY FEW" areas that was not a source of conflict in that church.
If the leadership will do a little bit of leg work in PERSONAL COMMUNICATION by sharing the church's policy on gifts, their vision for the ministry and the known needs of the church, I think givers will see their gift as IMPORTANT, and as MAKING a DIFFERENCE. It also gives an us an opportunity for the church leadership to espress a personal THANKS to the givers.

Posted by: Jeff | Apr 13, 2006 1:34:21 PM

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