Memorial Gift Designated to a Staff Member

by Marcatie
(Virginia)

As at wishes of the family of a deceased person, our church collected donations as a memorial gift that was going to be used to 'buy a car for a single mother in need.' It turns out this single mother is also a part-time pastor on the church staff.

Are these gifts still tax-deductible to the donor?

Some of the money was disbursed directly to a car dealer, and some may need to be dispersed to another pastor who has facilitated the car purchase while the contributions are still coming in.

Is either of these disbursements to be considered taxable income to the pastors?

Answer

In regards to your first question: Are these gifts still tax-deductible to the donor?

It would depend on how the funds were taken up. If it was through a regular offering, then yes it would be tax deduction to the donor. However, if the contributions were designated for a certain individual then no the donations would not be tax-deductible.

In regards to your second question: Is either of these disbursements to be considered taxable income to the pastors?

You will find many different opinions on this subject.

For the single mother, you will find varied advice. Some well-know CPAs have emphatically stated that all love gifts are taxable to the employee even if it meets the requirements to be a benevolent gift.

However, Dan Busby, CPA states in his book , Zondervan 2011 Church and Nonprofit Tax and Financial Guide
, “Love offerings (gifts) to staff members from church or nonprofit funds are taxable....unless they.... are a church attender. Then it requires careful documentation to ensure that the employee would have received a benevolence payment, and in the same amount if the individual had not been a staff member.

Many churches adopt policies prohibiting the payment of benevolence funds to employees, so make sure it isn’t against your church policy and the part time pastor meets the qualifications for a benevolence payment.

In regards to the other pastor, I do not know why the disbursments would need to be in his name. That could cause it to look like taxable income to him. I would consult a CPA on both issues.