Earmarking Gifts
Responsibilities of the Church and Donor
What is Almsgiving?
Most of our churches have an alms fund, with one or more ordained deacons managing the contributions. Church alms funds are an organized and anonymous channel for members to participate in mutual aid, as encouraged in Matthew 6:1-4. Giving through your local church’s alms or deacon fund provides many safeguards. It is right to share your resources with others, and a right thing should be done in the right way. Responsible parties should be in place to administer the funds, and giving decisions should be made within guidelines established by the church brotherhood.
Even the government recognizes that caring for the needy is a legitimate and important charitable and religious role of the church. Churches who care for their own needy members and for other needy people lessen the government’s burden to care for its citizens. For this reason, the U.S. tax code permits tax-deductions for charitable giving —including almsgiving— but only if that giving is done properly through a church or an approved charitable organization. Almsgiving done improperly is not tax-deductible. To preserve our Christian witness, it is important to operate our church alms funds in compliance with IRS regulations covering charitable giving.
Receiving a tax deduction should never be a motivation for almsgiving. True alms are given out of a heart of love for God and others and to support the work of the local church. Any tax deduction is only an “after-the-fact” side benefit for something you would have done anyway. The main benefit of giving is the LORD’s blessing, not the tax deduction that might result.
The Responsibilities of the Donor
For a charitable gift to be tax-deductible, it must be made to a tax-exempt organization. Exempt organizations include nonprofit organizations which applied for and received formal tax-exempt 501(c)(3) status from the IRS. The definition of “exempt organizations” also includes churches, which are automatically considered to be tax-exempt organizations, without having to apply for formal tax-exempt status.
Churches should be cautious when setting up funds that are intended to benefit one particular individual. An alms fund or deacon fund should be a general charitable fund which can be used for a variety of needs, and not simply a tax-deductible bank account to benefit “the Miller Family.” As part of your local brotherhood, you will naturally be aware of local needs and generally understand how the church is using its funds. However, when giving a contribution, you should be willing to leave the decisions to the brotherhood and not attempt to personally instruct the church or church deacon as to where your gift is to be used.
Gifts Earmarked to Benefit Specific Individuals or Families
Giving directly to a person or family in need is commendable and proper in many circumstances, but such gifts are not tax-deductible. Even if given through a church, a gift is not tax-deductible if it is restricted for a specific individual or family. “Charity begins where certainty in beneficiaries ends.” (Thomason v. Commissioner of Internal Revenue, 2 T.C. 441, U.S.T.C., 1943) In other words, if you have the ability to direct your gift to benefit a specific individual or family, then your gift is a personal gift rather than a charitable contribution. To be clear, you are free to make such personal gifts all you wish between yourself and a recipient, but the church alms fund is not a good vehicle for your personal giving choices, nor should you claim any such personal gift amounts as tax-deductible.
Giving to a church but then restricting the gift for a specific brother or family in need is viewed as “earmarking” by the IRS and should be avoided. One common place where earmarking occurs is on the memo line of a check. You should not write the name of an individual, family, or business on the memo line of your donation check. Another form of earmarking is passing funds to a deacon but then telling him privately to give the funds to a specific person.
The IRS views earmarking as a “pass through” arrangement. Just as a gift given directly to an individual is not tax-deductible, a gift given to an individual through a church is also not tax-deductible. Failure to follow these rules could result in financial penalties for the donor and could cause legal troubles for the church. Church deacons or treasurers should not issue contribution receipts for any gift that is earmarked to benefit a specific individual or family, regardless of whether that earmark was made in writing or verbally.
IRS rules on tax-deductibility are not intended to discourage generous giving to those in need; rather, they ensure that charitable giving is done properly and with integrity. Tax-deductions should not be the motivation for alms giving--we should be willing to “do right” the right way. Make personal gifts if you wish, giving directly to individuals in need, but don’t try to use the church alms fund for making your personal gifts. The alms fund is the church’s work, not your personal tool.
Examples of Gifts the IRS Generally Does Not Consider Tax-Deductible :
You make a gift to Sam Stoltzfus to help with his large hospital bill. Your gift to an individual is a personal gift and not tax-deductible, because you chose who benefits from the gift.
Your church opens a bank account to benefit the Andy Miller family with their medical needs, or the church has a fund called the “Miller Medical Fund.” Gifts made directly at the bank or to the special church fund, are not tax-deductible because the fund is intended to benefit only a specific family. The church may choose to operate such funds to meet a specific need, but it should not issue tax-deductible receipts for gifts to these funds.
You make a gift to your church alms fund but tell the deacon that the gift is made to help the Amos Martin family with expenses related to their handicapped child. Although the gift was given to the church, it is not tax-deductible because you earmarked the gift for the benefit of a specific family. Don’t use the alms fund to make your personal gifts.
You make a gift to the alms fund of the parochial church school to help pay the school tuition or fees for the children of widow Sadie Miller. Your gift to the church or school is not tax-deductible, because you earmarked the gift for the benefit of a specific student or family.
You make a gift to a church mission fund but earmark it for the Henry Zimmerman family who are missionaries in Haiti. Your gift is not tax-deductible, because you earmarked it for the benefit of a specific family. You could make a tax-deductible gift for the mission fund on a “where most needed” basis, or even for “the church-directed mission project in Haiti,” but not a gift which is earmarked to be passed to the specific family.
Conclusion
Remember, the giving of alms is simply doing the right thing to help others, out of a heart of love and for God’s glory. Both giving and receiving alms builds strong bonds of love and loyalty within the church. For those outside the Anabaptist church, our practice of brotherhood mutual aid stands out as a powerful witness of how Christians can and should care for each other’s needs.
Promote and protect this cherished practice. Value the role of your deacon in the church. Contribute generously to your local alms or deacon fund, quietly supporting the church as it seeks to carry out God’s work in a responsible manner.