Gift to pastor used for housing equity allowance

by Marie
(Ohio)

Our church recently received a sizeable contribution ($10,000) designated as a pastoral love gift. Our finance committee is unsure how to handle it, particularly because it is a significant amount of money. We understand that the contribution is not tax-deductible to the donor, as it was earmarked as a gift for the pastor, and that the income is taxable to our pastor. My questions are these: 1. Would a gift of this size be considered "inurement to an insider" or an "excess benefit transaction"? 2. In lieu of giving the pastor the money directly, we have considered depositing the funds in the housing equity fund established for him. The fund is in the church's name, and we retain control of it until such time that the pastor retires. Again, if we went this route, could that be considered "inurement"? And if not, if we could legally make this contribution to the housing equity fund, would the contribution be considered taxable for federal or SS purposes? Any help is appreciated. Thanks!

Comments for Gift to pastor used for housing equity allowance

Click here to add your own comments

Jan 17, 2013
gift earmarked to pastor
by: Anonymous

I recently went to an IRS workshop for small & med. sized non profit organizations and this is what the IRS E.O. speaker said:
Money designated for employee's goes into the church fund and is used to offset the salary. It is not for over the salary amount or it can be considered private benefit or inurement.
If you pay your employee below what they could be getting (small churches) then a cap should be set to insure you don't go over a "reasonable" salary.
Have comparable salaries for your location in place to ensure all salaries are reasonable as it is up to the church to "prove" not the IRS.

Prayers

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Church Accounting FAQs.

Need a Consultation, help setting up an effective Accounting System, or someone to do your monthly bookkeeping?