DESIGNATED CONTRIBUTIONS

 What are “Designated Contributions”?

Designated Contributions are contributions made to the church for a specified purpose.  Usually a donor designates his contribution to a specific fund or to an individual.

 Can a donor designate his contribution to an individual?

 According to Revenue Ruling 62-113 contributions earmarked for a particular individual are treated as being gifts to the designated individual and are not deductible.  Churches should not issue tax-deductible receipts for contributions that are designated for individuals.

Exception:  Contributions earmarked for individuals who are employed or supported by the church are deductible because these contributions are considered taxable income to the recipient.  This would include pastors and missionaries.  Contributions received for missionaries should be sent to the mission board or the employer who issues the W-2 so that these amounts can be included on the W-2.

 How may a church respond to a Designated Contribution? 

When the contribution is designated to an individual who is not an employee of the church:

(1)   Return the check to the donor or

(2)   Accept the check but stamp it “NONDEDUCTIBLE” on its face with red ink.

 When the contribution is designated to a fund or for a specific purpose:

(1)   Use the funds as designated by the donor or

Contact the donor and request permission to use the funds in a different way.