Transcript Religious contributions

June 25, 2014
CLAconnect.com
©2014 CliftonLarsonAllen LLP
©2014 CliftonLarsonAllen LLP
Contributions: What Religious
Organizations Should Know
To ensure compliance imposed by IRS Circular 230, any U. S. federal tax advice
contained in this presentation is not intended or written to be used, and
cannot be used by any taxpayer, for the purpose of avoiding penalties that
may be imposed by governmental tax authorities.
The information contained herein is general in nature and is not intended, and
should not be construed, as legal, accounting, or tax advice or opinion
provided by CliftonLarsonAllen LLP to the user. The user also is cautioned that
this material may not be applicable to, or suitable for, the user’s specific
circumstances or needs, and may require consideration of non-tax and other
tax factors if any action is to be contemplated. The user should contact his or
her CliftonLarsonAllen LLP or other tax professional prior to taking any action
based upon this information. CliftonLarsonAllen LLP assumes no obligation to
inform the user of any changes in tax laws or other factors that could affect
the information contained herein.
©2014 CliftonLarsonAllen LLP
Disclaimers
• If you are experiencing technical difficulties, please dial:
800-422-3623.
• Q&A session will be held at the end of the presentation.
– Your questions can be submitted via the Questions
Function at any time during the presentation.
• The PowerPoint presentation, as well as the webinar
recording, will be sent to you within the next 10 business
days.
• Please complete our online survey.
©2014 CliftonLarsonAllen LLP
Housekeeping
• A professional services firm with three distinct
business lines
– Accounting and Consulting
– Outsourcing
– Wealth Advisory
• 3,600 employees
• Offices coast to coast
• Nonprofit group serves 6,000 clients across the
country
©2014 CliftonLarsonAllen LLP
About CliftonLarsonAllen
• Barb DuBois
Barb in a Principal in our St. Louis office. With more than 30 years of
experience, Barb spends most of her time serving nonprofits and their
related auditing, accounting, reporting and consultation needs.
• Jeff Parker
Jeff is a Tax Director with CliftonLarsonAllen. Jeff is responsible for tax
compliance, research, and planning for various entity types, with a focus
on nonprofit organizations.
©2014 CliftonLarsonAllen LLP
Speaker Introductions
To provide your religious organization with knowledge
related to:
• What qualifies as a contribution.
• What are your fiduciary responsibilities as the donee
when the contributions aren’t cash.
• What gifts your members can claim as charitable
deductions.
.
©2014 CliftonLarsonAllen LLP
Learning Objectives
•
•
•
•
•
•
A gift of cash or property
Claimed as a deduction in the year in which the
contribution is made
Unconditional and without personal benefit to the
donor
Made “to or for the use of” a qualified charity
Within the allowable legal limits
Properly substantiated
©2014 CliftonLarsonAllen LLP
Six Requirements a Charitable Contribution
Must Satisfy
• Gifts of property are deductible as contributions
such as
•
•
•
•
•
•
Real Estate
Stocks and Bonds
Automobiles
Art Collections
Insurance policies
Inventory
©2014 CliftonLarsonAllen LLP
A Gift of Cash or Property
• Donation of professional services are NOT deductible
by the individual
• For the Donee Organization to record in-kind
professional services as contribution revenue and
related expense, the services must be those that the
Organization would not otherwise be able to provide
without purchasing them and must include a service
that requires expertise.
• Unreimbursed expenses of the donor individual may
be deductible such as out-of-pocket expenses
(mileage, lodging, required supplies, etc.)
©2014 CliftonLarsonAllen LLP
Donated Services are NOT Deductible
• As an individual or business, you cannot claim or
deduct the value of rent-free building space provided
to a charitable organization.
• However, as the religious organization, if you are
receiving rent-free building space, you should
identify the fair market value of that space and
record contribution revenue and rent expense in
your financial statements.
©2014 CliftonLarsonAllen LLP
Rent-Free Use of a Building
10
• Exception – It is deductible in year 1 if the check is
mailed and postmarked in year 1, even if it is
received early in year 2 by the church.
• However, if the check is dated in year 1, but
delivered to the church in year 2 (no mailing, no
post-mark), then it is deductible in year 2.
• This practice is also the same for contributions made
on your credit card.
©2014 CliftonLarsonAllen LLP
Charitable Contributions Must be Claimed in
the Year They are Delivered
• To make a charitable contribution, that is deductible, the
donor must made a gift that absolutely and irrevocably
transfers title, dominion and control over the gift. The
charitable contribution must be unconditional.
• No direct or material benefit may inure to the donor.
• If the donor does receive a benefit in exchange for a
contribution, then the charitable contribution deduction is
limited to the extent that the cash or property transferred by
the donor exceeds the fair market value of benefit received in
return.
• **Benevolence Fund – consider establishing such a fund to
receive donations.
©2014 CliftonLarsonAllen LLP
Unconditional and Without Personal Benefit
12
• Religious organizations should implement a gift
acceptance policy.
• A gift acceptance policy would govern what types of
gifts the organization would accept, and should
consider the affects of acceptance of such gifts on its
fiduciary responsibility to meet any restrictions
imposed by the donor as to purpose or time
(restricted gifts) or endowment gifts whose corpus is
to be maintained in perpetuity and only the earnings
used therefore.
©2014 CliftonLarsonAllen LLP
Donor Gifts with Restrictions and/or
Fiduciary Responsibility
13
• The Uniform Prudent Management of Institutional Funds Act of
2006 (“UPMIFA”)
©2014 CliftonLarsonAllen LLP
Donor Gifts with Restrictions and/or
Fiduciary Responsibility(Continued)
– Adopted in 47 states, with minor variations.
– UPMIFA includes provisions to govern the release and modification of
restrictions on charitable funds to permit more efficient management of these
funds.
– UPMIFA applies to churches and religious organizations who receive and hold
funds for a charitable purpose.
– UPMIFA should be consulted when an Organization has accepted charitable
funds with a restriction and determines it may not be able to honor the
donor’s restrictions and is unable to obtain the donor’s release from the initial
restrictions on the gift.
– UPMIFA should be consulted when the Organization has an endowed gift, in
which it may desire to use some of the original historical gift (corpus).
14
• Qualified Organizations must satisfy all of the
following requirements:
– Created or organized in the United States or U.S.
Possession.
– Organized and operated exclusively for religious,
educational, or other charitable purposes.
– No part of the net earnings or which inures to the benefit
of any private individuals; and
– Not disqualified for tax exempt status under section
501(c)(3) by reason of attempting to influence legislation,
and which does not participate or intervene in any political
campaign on behalf of any candidate for public office.
15
©2014 CliftonLarsonAllen LLP
Contributions Made To Or For The Use Of A
Qualified Organization
– Contributions made directly by church members to a foreign church or
ministry is not tax-deductible
– Church members can deduct a designated contribution made to their Church,
and then the Church can make a contribution to a foreign charity
– However, the Church member cannot require/restrict that the Church make
the contribution to the foreign charity.
– Church members can deduct designated contributions made to their Church,
in support of a Church’s Mission Fund or Missionaries that may be serving in
foreign countries as long as the Church maintains control of the related
expenditures.
– Mission Trips – If you desire to participate in your Church’s sponsored mission
trip, the Church should establish the “cost of the mission trip” and have
control over the related expenditures (i.e. pay travel, lodging, food, etc.,).
Then, you can make a contribution for the trip to the Church that qualifies as
a tax-deductible contribution for you personally.
16
©2014 CliftonLarsonAllen LLP
Contributions made to Foreign Charities or
Missionaries
– Ordinary Income Property
©2014 CliftonLarsonAllen LLP
Amount of Deductibility-Ordinary Income
Property
◊ Amount of deductible contribution is normally the amount that
would have been ordinary income or short-term capital gain if the
property had been sold at its fair market value.
◊ This generally limits the deduction to the donor’s basis in the
property.
◊ Ordinary income property includes stocks, bonds, jewelry, coins,
cars and furniture held for one year or less.
17
• Capital Gain Property –
©2014 CliftonLarsonAllen LLP
Amount of Deductibility – Capital Gain
Property
– Includes capital assets held more than one year.
– Capital assets includes most items of property that are used for
personal purposes or investment such as stocks, bonds, jewelry,
coin/stamp collections, cars, furniture or real estate used in the
donor’s business.
– In general, donors who contribute capital gain property, can claim a
charitable deduction in the amount of the property’s fair market value
at date of gift.
– Exception - In some situations the donor must reduce the fair market
value to an amount that would have been long-term capital gain if
property had been sold for its FMV.
18
• Donor must retain a bank record of the cash
contribution showing the charity’s name, date/ and
amount of the contribution.
• The Charitable Organization must provide a written
communication show the charity’s name, date of the
contribution and amount of the contribution from
the donor for cash contributions of $250 or more.
©2014 CliftonLarsonAllen LLP
Substantiation
19
• Charity’s written donor acknowledgement must
include one of the following:
©2014 CliftonLarsonAllen LLP
Substantiation
– Statement that no goods or services were provided by the
charity in return for the contribution, if that was the case,
or
– Statement of description and good faith estimate of the
value of goods or services, if any, that the charity provided
in return for the contribution, and
– Statement that goods or services, if any, that the charity
provided in return for the contribution consisted of
intangible religious benefits, if that was the case.
20
• The Substantiation Rule imposes on the Donor the
responsibility to obtain the obtain written
documentation as required in order to itemize
deductions
• However, Churches should take an active role and
provide the proper substantiation written
acknowledgements to their donors in a timely
manner to allow deductibility.
©2014 CliftonLarsonAllen LLP
Substantiation is the Donor’s Responsibility
21
©2014 CliftonLarsonAllen LLP
Substantiation Requirements of Individual
Contributions of Noncash Property over
$5,000
• To claim a charitable contribution for noncash
property over $5,000, the donor must satisfy all of
the following:
– Obtain a qualified appraisal,
– Prepare a qualified appraisal summary and include it with
his tax return submission (form 8283),
– Maintain records, such as described above (written
acknowledgement from charity, amount, date, description
of property)..
22
• There are 10 rules for substantiation of charitable
contributions
• Substantiation rules vary depending on the amount of
individual donor’s cash contributions
• Be aware of quid pro quo rules
• Rules on Individual contributions of noncash property valued
by the donor at less than $250 vary from noncash property
valued by the donor at $250 to $500 and on those at more
than $5,000
• Rules are different on donations of (a) cars, boats and planes;
(b) stocks; and (c) clothing/household items.
©2014 CliftonLarsonAllen LLP
Substantiation – Remember……..
23
Harold Parsons, CPA, Principal
[email protected]
612-397-3058
©2014 CliftonLarsonAllen LLP
©2014 CliftonLarsonAllen LLP
Questions and Thank you
Barb DuBois, CPA, Principal
[email protected]
314-925-4414
Jeff Parker, CPA, Tax Director
[email protected]
618-310-2006
twitter.com/
CLAconnect
facebook.com/
cliftonlarsonallen
linkedin.com/company/
cliftonlarsonallen
CLAconnect.com
24