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7 Must Rules for Tax Receipts
By Raul Rivera
It happens each year. Churches everywhere are trying to make sure they send out tax-deductible contribution statements to their donors by January 31st. To help ensure that the statements you send out are very accurate, let me share with you some rules for doing it right. Some of the rules you may already know, but some I guarantee you will not.
Rule #1: Receipt Not Required: This will take you by surprise, but there is nothing in the law or regulations that requires a church or non-profit to issue a receipt or contribution statements. However, if you choose not to give contribution statements, many of your donors will choose not to give any more of their tithes and offerings. When issuing a receipt or contribution statement it is vital that you do it right. When you issue contribution statements that have incorrect information about tax deductibility you risk legal and tax trouble for your ministry and for the donor; therefore, it is important that you get it right. Paying close attention to the rest of the rules listed in this blog will help you.
Rule #2: The Credit Card Rule: Many churches now accept credit card donations. However, Publication 526 states that contributions charged to a bank credit card are deductible in the year that the charge is made. That means that if an individual makes a credit card donation on December 30th, but the church does not actually run the card until January 1st, the donor does not get to write it off until the next year. If your church had this happen, make sure you adjust your records to make sure the contribution statement is correct.
Rule #3: The Quid Pro Quo Rule: This rule requires your ministry to keep track of donations made to your church in which the donor receives something in return. An example may be the recording of a Sunday sermon. A church sells a CD of the sermon for $10.00 and the donor gives the church $50.00. Quid pro quo rules allow the donor to get a tax-deductible donation of $40.00 because he/she received something in return for his/her donation. That leads to the next rule.
Rule #4: The $75.00 Rule: Now that you know the quid pro quo rule, tax regulation requires any quid pro quo contribution that exceeds $75.00 to receive a separate written receipt that states how much was donated and a good faith estimate of the value of the goods or services he/she received in return. Let me give you an example. Several years ago, I attended a revival at a church in Florida. The traveling evangelist had a table in the lobby where he sold some of his books and CD's. He also had a special table where someone could sign up to become a partner in the ministry. All someone had to do that day was to contribute $100.00 and make a pledge to give $100.00 per month, and in return he/she would get newsletters, prayer cards, and special reports. And to top it off, he/she would also get a beautiful gift basket, worth over $50.00. Though the baskets had actually been donated to the ministry, when the ministry gave the baskets away to those who made the $100.00 contribution, under the quid pro quo rule the receipt could only state that $50.00 was tax deductible because the basket the donor received in return was worth $50.00. Under the $75.00 rule, because more than $75.00 was originally donated (though only $50.00 counts as tax deductible), in order for the donor to get a tax write off he/she must receive a separate written receipt stating the good faith estimate of $50.00 received back in goods/services. A simple contribution statement will not do.
Rule # 5: The $250.00 Rule: This rule requires that any donation of $250.00 or more made to your ministry be treated differently. In order for the donor to get a tax write off, he/she must get a separate written receipt stating how much was given and that, "no goods were provided except for intangible religious services."
Rule # 6 The Non-Cash Rule: This rule prohibits churches from giving receipts for donations that are not cash. For example, if a member donates a used computer, the church is prohibited by Section 170(f)(8)(B)(i) from estimating the value of his/her donation and issuing a receipt for that amount. Therefore, if the computer is worth $600.00, the church cannot give the donor a receipt for $600.00. Those who have attended our conference can find a copy of the letter they ought to give.
Rule #7: The $500.00 Rule: This rule applies to donors and to churches when a person makes a non-cash donation that is valued at more than $500.00. Churches often receive big donations such as computers, desks, pianos, organs, drums and other office equipment. In order for the donor to write off the donation, he/she must file form 8283 with his/her tax return. The purpose of this form is to claim the value of the deduction and for the church to sign off on the form to acknowledge receiving the gift.