Does Your Church Know the 250 Dollar Rule?

Written by Founder Raul Rivera on Aug 07, 2011 in IRS Compliance

Pastor Jones' Church and Tom

It was a beautiful spring day in mid April.  The Sunday service the day before marked the first time that Pastor Jones church had 175 people in attendance.  On Monday, he walked into his office to see a note from Tom requesting a meeting with him.  Pastor Jones was glad to see Tom's note.  He and Tom had been talking about planning a hunting trip for men and their sons in the Buffalo National River.  Though the trip would not be a for another 7 to 9 months, knowing Tom and his attention to detail would mean a pleasant afternoon discussing things that they both loved--hunting and preparing trips that forge wonderfully meaningful memories for their sons. 

Pastor Smith's Church and Rodrigo

Sunday was a wonderful day for Pastor Smith's church.  The Sunday service featured an illustrated sermon which yielded 21 new salvations.  Attendance was 182.  What excited Pastor Smith about the numbers was that he felt confident in the church's ability to disciple the new believers.  Being Monday morning, Pastor Smith went through his routine activities which included overseeing the usual deposit of the duly counted tithes and offerings, issuing receipts, going over the list of those who attended the church for the first time and sending each one a welcome letter inviting them to the monthly Sunday banquet held for newcomers.  As his day transpired, he received a text message from a good friend and faithful church member, Rodrigo, who had just arrived back in town and wanted know if he could have lunch with his pastor.

Pastor Jones Meeting with Tom

After having read Tom's note, Pastor Jones immediately instructed Lisa, the church receptionist, to schedule a meeting with Tom for 2:00 p.m.  Going on the assumption that they would discuss life, the future hunting trip and church life, pastor Jones had no idea that Tom's meeting with him was regarding a matter with the IRS.  As soon as Tom walked into pastor Jones office, Pastor Jones knew something was wrong.  Tom was very quick and to the point.  No usual handshake followed by the pseudo hug where right shoulders collide in one motion.  Tom began by expressing how very disappointed he was with the church.  He had just received a letter from the IRS denying over $24,000.00 in deductions made to the church for tax years 2008 and 2009.  He had also received a tax assessment of over $8,130.00 that he owed to the IRS.  The IRS agent agreed that Tom should have gotten a tax write off, but simply put, the receipt he got from the church did not meet the requirements of Section 170 and therefore, though the agent did not want to, he had to deny the deductions and assess a tax.  Tom ended up having to pay an additional $8,130 in tax as a consequence of the church's failure to properly issue a receipt that met the requirements of Section 170.

When Tom began attending in early 2007, he immediately began tithing to the church.  But because of the nature of his employment, he was paid on a monthly basis causing most of his giving to the church to be in amounts of nearly $1,000.00. Though he was able to prove to the IRS that he gave to his church, the strict substantiation requirements imposed by Congress under Section 170 requires that any donation made to the church of $250.00 or greater, receive a separate receipt stating whether any goods or services were received in return for the donation.  Tom gave 16 different times to the church in 2008 and 18 different times in 2009.  In 2008, he gave on 12 separate occasions checks to the church that were for more than $250.00.  And 14 in 2009.  Pastor Jones was grateful for Tom's giving and knew that it was those faithful gifts to the church that made the ministry possible.  However, Pastor Jones did not know the $250.00 rule.  He was at a loss for words.

Pastor Smith's Meeting with Rodrigo

Rodrigo is a well-traveled man, conducting business throughout most of South America consulting with banks on security issues.  Life for him had always seemed successful on the outside.  However, in February of 2006 his marriage was on shaky ground and in an effort to please his wife he attended a midweek service where he heard Pastor Smith preach a message on redemption.  Though he had no idea what Pastor Smith was talking about, the words that he spoke that evening convicted Rodrigo of his sin and the rest was history.  As the two men reminisced the early days of the church, they remembered the day Rodrigo got a letter from the IRS asking that he substantiate the $39,000.00 he gave to his church in 2008 and 2009.  Rodrigo responded by sending the IRS copies of his cancelled checks, a contribution statement and a separate receipt he got for each contribution he made to the church that was for $250.00 or more.  Rodrigo thought that the receipts he got from the church were overkill.  He actually suggested that if the church did not waste so much paper issuing these receipts, it could save a lot of time and money.  For tax year 2008, Rodrigo received one itemized contribution statement from his church and 27 other receipts for each contribution totaling $250.00 or more.  For tax year 2009, he received one itemized contribution statement and 31 separate receipts.  Each of the receipts had a statement that read as follows:  "No goods or services were provided in exchange for your contribution with the exception of intangible religious services."  Little did Rodrigo know that Pastor Smith's church and the way they gave receipts would save him in an audit of his tax return.  Pastor Smith and Rodrigo continued their wonderful meeting, which lasted for about an hour.  After Rodrigo left, Pastor Smith felt blessed that the Lord would send such awesome people to his church.  Just another day being a pastor.

What Do You Think Will Happen Between Pastor Jones and Tom?

After Tom left that meeting, Pastor Jones felt devastated and responsible for what had happened to Tom, yet helpless on how to remedy the situation.  Tom was not asking for financial help. . .he was just expressing his clear disappointment with the church.  What Pastor Jones thought was going to be another day pastoring turned out to be depressing!  What if the same thing happened to other members?  They all got the same kind of receipts as Tom!  In an instant, the fact that 175 people attended the day before was no longer a cause for joy.  Instead, it appeared as a travesty of success. Pastor Jones had no idea what would become of his relationship with Tom.  What do you think?

Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Blessings,
Raul Rivera


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