Ministries are often faced with receipting questions when gifts do not come directly from a donor in the traditional cash/check form. Gifts from donor-funded endowments, donor-advised funds, IRA gifts, and non-cash gifts are just a few of challenges faced by those charged with acknowledging contributions. Listed below are some of the more common ways in which gifts might come to your ministry that may require special treatment. While not an exhaustive list, most will find this helpful, and we thank our friends at Christian Church Foundation for sharing this information with us.
DO – say thank you whenever possible. DON’T – provide a tax receipt.
Many ministries are fortunate to receive regular distributions from donor-funded endowments. These distributions may be from previous members who have remembered the congregation in their estate plans, or from current members who have funded an endowment to add to their annual support. It is NOT appropriate to include these gifts on a statement that serves as the donor’s support for tax-deductible annual gifts, because the donors make a deductible gift when they contribute to the endowment and are not eligible for an additional deduction for distributions. It is always a best practice to acknowledge the gift with a thank you letter when that’s possible. A personal note from your ministry’s leadership is especially appropriate when you’re notified that a donor has established a new fund for your benefit!
Donor-advised fund gifts:
DO – say thank you. DON’T – provide a tax receipt
Donors typically use Donor Advised Funds as a way to make a tax-deductible gift one year and make a gift to your ministry in a later year. They may also use a Donor Advised Fund as a way to liquidate stock which they will later use for their charitable gifts. Donors receive a tax receipt when they give to the donor-advised fund; it is improper for your ministry to issue a tax receipt for distributions to you from such funds. Distributions from a donor-advised fund may be used to fulfill a donor’s annual gift intentions, so long as their commitment to you is not in the form of a legally binding pledge. Congregations may find it helpful to give their donors two statements – one for tax deductible gifts and one for other non-deductible gifts. This allows your ministry to say thank you for gifts from all sources, and to report a comparison of total gifts versus the donor’s intended giving or “pledge”.
DO – write a formal acknowledgement of the IRA gift. DON’T – provide a tax receipt
Gifts that come directly from a donor’s IRA are a tax-effective way for donors over the age of 70 ½ to contribute to charity. The money held in a donor’s IRA has not been taxed and will not be taxed to them if they follow the rules for giving directly from the IRA. These gifts, since the income was never taxed, are not tax deductible to the donor. The Christian Church Foundation has a sample letter for receipting a donor’s IRA gift here: IRA Donors. It is also appropriate to provide your donor a statement of non-deductible gifts received, which would include direct transfers from the donor’s IRA.
DO – issue a tax receipt. DON’T – provide a dollar value for the gift
Ministries may receive support in the form of marketable securities, food contributions, land or other property, collectibles, and more! These gifts require special receipting, and the dollar value of these gifts should not be reported to the donor in the same way as gifts of cash. An appropriate tax receipt for such a gift will simply describe the item(s) given (such as “100 shares of Apple Stock, received by us on June 1, 2017” or “three cheesecakes to be sold at the youth dessert auction” or even “Four bags of used clothing for the congregation’s rummage sale”) Congregations should NOT provide a value for the gift on the tax receipt. This seems to be especially tempting when the gift is a marketable security and the congregation can determine the actual sales proceeds. The liquidation value is NOT the appropriate deductible value for the donor’s taxes, and it is improper for ministries to provide the liquidated value on a donor’s tax receipt.