Would you like to help someone who is experiencing financial troubles? Do you know whether your gift would be tax deductible? These questions raise a more fundamental one: How can a well-intentioned individual or 501(c)(3) public charity best aid those with financial needs, while maximizing available tax benefits and otherwise exercising wise financial stewardship? The answer to these questions is for a public charity, such as a church, to develop a benevolence policy to be funded through gifts from individuals and others.
Benevolent gifts are typically given to individuals or families in financial distress. If given directly to a recipient, such gifts likely will not be tax deductible. On the other hand, if such gifts are made to a public charity’s benevolence fund that is responsibly controlled, then they should be tax deductible as well as perhaps more beneficially utilized.
Consider Joe, a man whose mother dies. He and his remaining family members lack funds to pay for a funeral and burial, but Joe and his family have many friends in their church community who want to help them. If their gifts were given directly to Joe’s family, such generosity would be laudable but not tax deductible. More broadly, it would not necessarily reflect any widespread church concern for those in financial need, since the financial assistance effort is limited to Joe’s family.
Now consider if Joe’s situation spurs the church to develop a benevolence policy, to help more comprehensively with those in financial need – not just Joe’s family. The church board first recognizes the goal of providing benevolence as part of its religious and charitable mission, as well as its stewardship responsibility over the church’s charitable funds. The church board next appoints a committee of compassionate, responsible persons to handle benevolent requests, using their independent judgment to evaluate benevolent requests according to appropriate criteria. Appeals are made to raise money, perhaps highlighting Joe’s family need or other difficult situations. Donors give generally to the benevolence fund, not necessarily limited to any specific person.
Joe’s family then applies for financial assistance. The committee evaluates the request and decides that granting it would help Joe’s family’s legitimate financial need. The committee then authorizes the distribution of benevolence funds for such purpose.
In the end, all are benefitted. Joe’s family can take care of their loved one. Donors can enjoy the opportunity to help them and others in need, while receiving the full tax benefit for their charitable contributions. The church tangibly demonstrates both its responsible stewardship of donated funds and its compassionate care for people in need, all in fulfillment of its religious and charitable mission.
