New IRS rules require proof of giving to churches, charities

Published: Saturday, January 20, 2007 at 6:01 a.m.
Last Modified: Friday, January 19, 2007 at 11:52 p.m.
Placing a neatly folded bill or a clutch of coins into a collection plate as it passes along the pew calls up a Norman Rockwell image of American life.
But IRS rules taking effect this month may further change the way Americans contribute to houses of worship. The Pension Protection Act of 2006 prohibits donors from declaring contributions to churches or other charitable organizations unless they can produce records of the transactions.
Several clerics said they knew nothing about the change before a reporter called asking for comment.
"It probably will make a difference," said the Rev. Jerry Brown, the former pastor of St. Francis of Assisi Church in Concord, Calif., and the current pastor of Immaculate Heart of Mary in Brentwood, Calif.
Many clerics said they've seen a shift away from anonymous cash offerings. Personalized envelopes are common, and some churches have installed ATM-like machines to collect Sunday money.
Some larger churches accept monthly or yearly credit card payments.
"The Latino population tends to give cash, but the major bulk is giving electronically," Brown said.
"Many people give nothing" when the collection plate comes around, "but may have given $1,000 at the first of the month," said the Rev. Brian Joyce of Christ the King Church in Pleasant Hill, Calif.
The sweeping, nearly 1,000-page act addresses pensions and job-related savings plans. But it includes changes in charitable giving rules.
For one, donors must get bank or credit card statements or records from the charitable institution if they want to deduct those donations. The old rules required a paper trail only for contributions of $250 or more, said IRS spokesman Jesse Weller.
The rules only apply to those who complete a long-form tax statement and itemize deductions - about one-third of all taxpayers, Weller said.
Most churches provide an envelope with the donor's name or identifying number on it. Usually, a bookkeeper enters the amount in a computer and provides the congregants with a year-end statement.
Small, storefront churches without staffers or a network of volunteers may find the rules more onerous, said the Rev. Brian Stein-Webber, executive director of the Interfaith Council of Contra Costa.
Such is the case at First Christian Church of Concord, Calif., but the church still collects "several thousand dollars a year in what we call 'loose offerings,"' said its pastor, the Rev. Russell Peterman.
"It's hard to say how many people donate anonymously," he said. "I was not even aware of (the tax change), which tells me a lot of other people are not even aware of it."
The loose plate at Our Savior's Lutheran Church in Lafayette represents a maximum of 5 percent of the total weekly offering, said finance manager Bill Klaproth.
"We have no idea who it comes from," he said.
Our Savior sends out a year-end receipt and a quarterly statement that specifies exactly where the money went.
Among the 100 tax-law changes:
  • People 70- or older may contribute up to $100,000 from an IRA directly to a church or charity without penalty.
  • Those who give clothing or household items to charities cannot write off their value unless the donated items are in good condition.
    The IRS has not yet defined what constitutes good condition, although Weller said a TV that does not work is a prime example of something that would not be allowable. Donors must get a written appraisal of anything estimated to be worth $500 or more.
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