Q: If a person gives money to sponsor a child to go to church camp they can receive charitable giving credit. However, if a parent pays for their child to go to church camp, they do not receive charitable giving credit. Am I understanding this correctly?
A: Yes, your conclusions are correct. While it may seem a bit unfair, the rationale is based on who is receiving the benefit of the donor’s contribution. According to the IRS, if a person wants to give a donation to a church and get a tax deduction, the donor must relinquish control and allow the church to use the donation as it deems best. Similarly, in order for a donor to receive charitable giving credit for tax purposes, the donor cannot stipulate how the funds are to be used, or receive a benefit from the donation (other than intangible religious benefits).
Consider the following examples:
• If a donor makes a contribution to the church camp scholarship fund and notes that the funds should be used to send a needy child to camp, the donor can receive charitable contribution credit for the entire amount.
• If a donor gives money to the church camp scholarship fund and says the money must be used for their own child, the donor can’t claim a deduction, because they have received a tangible and personal benefit from the donation.
• However, if the donor gives $100 to the church and receives a thank-you gift valued at $40, the donor is only able to receive charitable giving credit for $60 because the donor received a tangible benefit of $40 (and the church receipt should clearly spell this out).
• Similarly, if the donor gives money to the church’s benevolence fund and says it must be given to the Smith family who just had a house fire, the donor can’t claim a charitable deduction. The donor is restricting the gift and forcing the church to use the gift for a specific purpose. This is contrary to IRS rules for charitable giving.
You might wonder how this is different from giving to a church building fund, or to a special
offering to provide water wells. The assumption is that these are approved projects initiated by
the church governing board. If the board initiates a project, a donor can specify and restrict funds for that project and still receive a tax deduction for charitable giving.
Rollie Dimos, CIA, CISA, CFE, is the Director of Internal Audit and the Center for Leadership and Stewardship Excellence at the AG National Office. As an auditor in the government and nonprofit sectors, Rollie has been helping leaders assess the strength of their organizational controls for over 25 years. If you have a question about this article, you can contact Rollie at firstname.lastname@example.org.
Rollie is the author of two books: Integrity at Stake: Safeguarding Your Church From Financial Fraud and Balanced Budget, Balanced Life. Using real-life fraud cases, Integrity at Stake helps churches assess their internal controls and minimize the risk of fraud. In Balanced Budget, Balanced Life, Rollie helps the reader create a personalized financial plan to achieve the balance between saving enough to live on and spending to enjoy a life worth living.