Missionaries & Tax Exemptions

Discuss questions around local unit policies for budgeting, reconciling, etc. This forum should not contain specific financial or membership information.
HunsakerTG
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Missionaries & Tax Exemptions

Postby HunsakerTG » Fri Nov 05, 2010 11:16 am

I am a bit surprised, and a bit confused, to see a specific sub-category for each missionary receiving support from a local unit. I understand the usefulness of the sub-category to track out-going funds. I can also see transferring funds from the Ward Missionary fund to a specific missionary's fund. But alarm bells are going off should funds ever be directly placed into a specific missionary's fund, instead of being donated to the Ward Missionary fund as a whole then subsequently transferred to a specific missionary. The reason for this alarm is we have been told that contributions made directly to a specific missionary are not tax deductible. The instructions that I've been reading regarding how to use CUBS seem to indicate that this policy (or practice or standard) is no longer in effect. What is the current policy regarding receipt of Ward Missionary funds?

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Postby russellhltn » Fri Nov 05, 2010 11:27 am

HunsakerTG wrote:But alarm bells are going off should funds ever be directly placed into a specific missionary's fund, instead of being donated to the Ward Missionary fund as a whole then subsequently transferred to a specific missionary. The reason for this alarm is we have been told that contributions made directly to a specific missionary are not tax deductible.


Where did this instruction come from? I've seen that issue raised before by members who know tax law, but never by someone in authority. As such, I've never seen that as church policy to ward financial clerks.

Note that while the donations are made in a specific name, it's still an equalized payment - a fixed amount regardless of where they serve or their actual expenses. And I believe that all donations are non-refundable. If a family fails to make good on their commitment the missionary is not called home. I don't know tax law, but perhaps that's enough to satisfy tax requirements.
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Postby lajackson » Sun Nov 07, 2010 7:22 am

HunsakerTG wrote:. . . we have been told that contributions made directly to a specific missionary are not tax deductible.


Contributions made directly to a specific missionary are not. That is why members donate to the Ward Missionary Fund, and not to any specific missionary.

What the Church decides to do with those donations and how they decide to measure and track them after that is up to the Church, as long as they are used for missionary work.

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Postby JamesAnderson » Sun Nov 07, 2010 7:33 am

While eventually the funds do get pulled out and Church Headquarters does what they need to do with them, the fact that there is still a listing in the local unit's financial system may indicate it's more for the convenience of the member, especially at the end of the year when they get the year-end statement at the time of tithing settlement. It may be so the amounts donated will show up there.

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Postby lajackson » Sun Nov 07, 2010 7:38 am

JamesAnderson wrote:It may be so the amounts donated will show up there.


Of course, any amount a member donates to the Ward Missionary Fund will show up on their donation statement. But, there will be nothing on the statement that relates to any specific missionary. Just a contribution to the Ward Missionary Fund.

Many members donate to the Fund who do not have family members serving missions. It is just the same as any other donation to the Church for tithing, fast offering, or any other category of Church donation.

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Postby Amm_-p40 » Sun Nov 07, 2010 8:40 pm

When they switched over to the equalization plan there was a strict, perhaps over emphasis that, we have to do this(the equalization plan) because earmarked donation are not tax deductible.

Go talk to headquarters on why any donation to Other, no matter the purpose, is not tax deductible. You will hear all about "earmarked". If you apply the same logic and reasoning to the missionary fund as the Other account, you will cringe when you see someone write "for Elder Smith" on their donation slip.

If they wanted to be a little safer they should change the categories to something like "friends and family of Elder Smith" and members could write "I am a friend/family member of Elder Smith" as opposed to "For Elder Smith". This actually reflects the true nature of the subcategories and the donations. That money is not for Elder Smith, it is from a family member of Elder Smith.

But I suspect, and a quick perusal of the handbook seems to indicate, although never explicitly stated the reason, that the non refund nature of the missionary fund is the important part. But then that begs the question, lets make all donation, even to Other non refundable. What donor wants them back?. That leads to, it still can't be tax deductible because it earmarked. And now you see why tax lawyers cringe when they see "For Elder Smith" on the donation slip.

BUT, on the flip side it is very easy to just put it all in the ward missionary fund and then every month notice the numbers. If you are short, run a report or just look who did not make a payment. It's really pretty easy this way.

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Postby lajackson » Sun Nov 07, 2010 8:52 pm

Amm_ wrote:Go talk to headquarters on why any donation to Other, no matter the purpose, is not tax deductible.


Actually, some of them are deductible, and MLS knows the difference and will show on the Tithing and Other Offerings Statement whether a contribution is Charitable or Non Charitable.

However, this is not a tax forum, and the matter of what is deductible on an actual tax return is left to those who file those returns and their accountants.

It is sufficient for me to know that the legal experts at Church headquarters have worked with our ecclesiastical leaders to devise a plan where I may contribute to the Ward Missionary Fund and the IRS will allow it as an income tax deduction under certain circumstances.

If we follow the proper procedures as clerks, all will be well. Yes, members sometimes write things on their donation slips that ask for trouble. But, properly processed contributions in MLS will print onto the Tithing Statement in a way that will be beneficial to members.

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Postby aebrown » Sun Nov 07, 2010 9:42 pm

Amm_ wrote:If you apply the same logic and reasoning to the missionary fund as the Other account, you will cringe when you see someone write "for Elder Smith" on their donation slip.

But I suspect, and a quick perusal of the handbook seems to indicate, although never explicitly stated the reason, that the non refund nature of the missionary fund is the important part.


I think you hit the nail on the head when you said that the non-refundable nature of the donations is the key point.

Your other theories are interesting, but don't match a wide variety of facts about how the Church deals with these donations. There is nothing at all wrong with noting a missionary's name on a donation slip. Think of these facts:

  • On the missionary application, the Church asks who will supply the funding -- the family, the missionary, etc. This is clearly asking for some sort of commitment by those people. If it were taboo to connect the funding to the missionary charges to the ward missionary account, why would the Church ask this?
  • The Record Keeping FAQ talks about specifying a category for Ward Missionary donations. Why would this even be mentioned, if it were inappropriate to connect a donation to a Ward Missionary subcategory?
  • The Record Keeping FAQ also talks about "missionary contributions made in behalf of one of [a ward's] missionaries by his grandparents." Why discuss donations "made in behalf" of a missionary if that is not allowed?
  • The MLS Software Manual says "When the primary support is being supplied by the parents of the missionary, they should contribute support funds to the new ward." That reference to "primary support" seems quite similar to those that make you "cringe," but it is in an official publication of the Church.

Amm_ wrote:BUT, on the flip side it is very easy to just put it all in the ward missionary fund and then every month notice the numbers. If you are short, run a report or just look who did not make a payment. It's really pretty easy this way.


That's not really easy at all. You're assuming that every family pays regularly and that the source of the funding is obvious from the donor name. That's not true in many, many cases. I deal with situations all the time where your suggestion for running a report would not even come close to providing the needed information. If you keep track of the donations by missionary, this is trivial, but otherwise, it can be an accounting nightmare. We have a ward in our stake with 18 missionaries, where some of the parents pay a large lump sum, others do a donation in kind, others get behind on their commitments several months but then catch up, some families have two missionaries serving at the same time, etc.

There's not much point in speculating about exactly why the Church does what they do, or what the tax ramifications are for individuals. But let's not add restrictions on missionary donations that the Church clearly does not intend, either.
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Postby waynecooke » Sun Nov 07, 2010 10:18 pm

There is also the idea that the parents might keep track of how much they have paid toward their Missionary expenses.

Also, I know that my parents would have LOVED to have been able to deduct the money they paid out when I was on my mission (1966-1968).

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Postby gregwanderson » Mon Nov 08, 2010 8:34 am

MLS keeps track of what's "charitable" and what's not. Notice that the donor statement intended for tax purposes doesn't mention any of the categories used in MLS. There was a big court case about 20 years ago where a family from Idaho did battle with the IRS over claiming their son's missionary expenses as a charitable deduction. Following that high-profile case, the church changed and/or clarified many donation policies. I think it is unwise for us to stir up something which was "settled" long ago.

EDIT:

To Clarify:

All category and sub-category information in MLS is for the convenience of the church and the donor. The report shows which donations are charitable. Donor statements which show any categories (tithing, fast offering, ward missionary, etc.) are NOT to be used for tax filing. The only question is whether the donation was charitable. Charitable donations for tax purposes are listed on a specific form printed by MLS.

The $400 per month figure we assign to missionary support is arbitrary. It has nothing to do with the actual cost of supporting any individual missionary in any given month. The ultimate responsibility for the $400 per month payment falls on the ward. So any contributions to "Elder Smith" are recorded that way for the convenience of those who want to contribute to that $400 per month arbitrary figure. But once that money is in the ward account the donor has no say in what happens to it. And once that money is taken by CHQ the ward has no say in what happens to it. THAT is why there is NO ISSUE with the IRS about a donation being made "to a specific person." The church (a legitimate, charitable organization) dictates the use of that money.

Previous to the equalized payment system, families were sending money directly to their missionary sons and daughters. The church had nothing to do with those transactions OR what really happened to the money OR the amount of money "required" for missionary support. THAT is why a family had to go to court in order to claim it was a charitable donation. That's why they lost. That's among the reasons why the church has an organized system today.


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