As churches grow their donor base they invariably run into questions about their compliance obligations with respect to tax and other matters relating to donor contributions. While tax law places more emphasis on donors bearing the burden of getting receipts than on charities to provide them, the best practice is for churches to take the initiative in getting confirmations back to donors quickly.
Why issue gift receipts?
Issuing receipts serves two purposes. For one, it’s the polite thing to do. Regularly issuing receipts offers a church an opportunity to further foster its relationship with donors while offering a heartfelt thanks.
The second purpose of a receipt is to help donors when they complete their taxes. Providing a receipt promptly after a gift is made ensures that the donor has the right paperwork to include the gift in his or her itemized deductions. It also avoids the administrative burden that arises when donors who didn’t get a receipt come asking for them at tax time.
What goes into a receipt?
Any time a receipt is issued, the church should be sure to provide all the necessary information to allow the donor to claim a deduction for the gift even if the donor does not have access to personal records about the transaction.
To claim a deduction, a donor must have a record that satisfies IRS requirements. Two forms of record are accepted. The first is a record from a bank showing the name of the church, the date of the gift, and the amount. A copy of a cancelled check or a credit card statement will satisfy this requirement.
Providing a copy of a cancelled check or a credit card statement is often a burdensome problem for donors. Churches can help their donors tremendously by issuing a written communication, such as a letter or email, to the donor acknowledging the gift and specifying its amount, when it was given, and the identity of the church. Not only does this foster a stronger relationship with people who give, it also provides them with an alternative method of proving that the gift was deductible. For many donors, providing a written receipt to the IRS is preferable to providing relatively revealing banking records.
Get the right advice to make good decisions.
The Church Law Center of California provides comprehensive legal advice to churches and other nonprofits. We can help your church understand its obligations to ensure it complies with all the rules related to fundraising and other important topics. To schedule an appointment, call us at (949) 892-1221 or reach out to us through our contact page.
