Ministries are often faced with receipting questions when gifts do not come directly from a donor in traditional cash or check form. Gifts from donor-funded endowments, donor-advised funds, IRA distributions, and non-cash contributions are just a few of the challenges faced by those responsible for acknowledging gifts.
Listed below are some of the more common ways gifts may come to your ministry that require special handling. While not exhaustive, this guide will be helpful to many. We are grateful to our partners at Christian Church Foundation for sharing this information.
Donor-Funded Endowments
DO – say thank you whenever possible
DON’T – provide a tax receipt
Many ministries receive regular distributions from donor-funded endowments. These distributions may come from former members who included the congregation in their estate plans, or from current members who have established endowment funds to supplement their annual giving.
It is not appropriate to include these distributions on a tax-deductible giving statement. Donors receive a tax deduction when they contribute to the endowment—not when distributions are made.
Best practice is to acknowledge these gifts with a thank-you letter whenever possible. A personal note from ministry leadership is especially meaningful when a donor establishes a new fund for your benefit.
Donor-Advised Fund Gifts
DO – say thank you
DON’T – provide a tax receipt
Donors often use donor-advised funds (DAFs) to make a tax-deductible gift in one year and recommend grants to ministries in a later year. These funds are also commonly used to liquidate appreciated assets, such as stock, for charitable purposes.
Because donors receive a tax receipt when contributing to the DAF, it is improper for your ministry to issue a tax receipt for distributions received from it.
DAF distributions may be used to fulfill a donor’s annual giving intentions, provided those intentions are not part of a legally binding pledge. Many congregations find it helpful to provide two statements: one for tax-deductible gifts and another for non-deductible gifts. This approach allows ministries to fully acknowledge generosity while accurately reflecting giving commitments.
IRA Gifts
DO – provide a formal acknowledgment
DON’T – issue a tax receipt
Gifts made directly from a donor’s IRA are a tax-efficient way for individuals age 70½ and older to give. Because these funds have not been taxed—and will not be taxed if distributed properly—they are not tax-deductible.
Your ministry should provide a written acknowledgment of the gift, but not a tax receipt. It is also appropriate to include these gifts in a statement of non-deductible contributions.
The Christian Church Foundation provides a sample acknowledgment letter for IRA gifts.
Non-Cash Gifts
DO – issue a tax receipt
DON’T – assign a dollar value
Ministries may receive gifts such as marketable securities, food, land, personal property, or other in-kind contributions. These gifts require special receipting procedures.
An appropriate receipt should describe the gift, but not assign a value. For example:
- “100 shares of Apple stock, received June 1, 2017”
- “Three cheesecakes for the youth dessert auction”
- “Four bags of used clothing for the congregation’s rummage sale”
It may be tempting—especially with securities—to report the liquidation value. However, this is not appropriate. Determining the deductible value is the donor’s responsibility, and ministries should not include a dollar amount on the receipt.