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  1. #1
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    Default Legal question about designated giving

    Someone stated to me recently that if you give a designated offering to your church (or other exempt non-profit), for instance for the building fund, that there is an IRS regulation that stipulates that the church is not in any way obligated to use your designated offering for that purpose. They may take your designated gift and spend it on whatever is chosen without alerting you in any way.

    I am not speaking of a general offering or tithes for the running of the church. I am speaking of, say, a special speaker love offering that is taken up at the end of a church service and you write a check designating it for the special speaker and then that money is taken and used for office supplies and no money is given to the special speaker. Is there no obligation for a church to use the funds that were given in good faith for something else?

    The person told me that there is a 'no strings attached' clause in an IRS regulation for this.

  2. #2
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    Quote Originally Posted by Mrs.Soprano View Post
    Someone stated to me recently that if you give a designated offering to your church (or other exempt non-profit), for instance for the building fund, that there is an IRS regulation that stipulates that the church is not in any way obligated to use your designated offering for that purpose. They may take your designated gift and spend it on whatever is chosen without alerting you in any way.

    I am not speaking of a general offering or tithes for the running of the church. I am speaking of, say, a special speaker love offering that is taken up at the end of a church service and you write a check designating it for the special speaker and then that money is taken and used for office supplies and no money is given to the special speaker. Is there no obligation for a church to use the funds that were given in good faith for something else?

    The person told me that there is a 'no strings attached' clause in an IRS regulation for this.
    One of the reasons that Jim Baker went to jail is that misused funds designated for other projects (a new car instead of a mission project). Perhaps that has been changed but I'm almost sure that a "no strings attacched" attitude would be atune to financial manipulation.

    We occassionally put in our bulletin, "Offerings that are used for designated projects, that are overfunded, will be used at the disgressions of the Church Board." This is usually a very small amount because we inform the congregation quickly once a project is 100% funded.
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  3. #3
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    I found this article (it's only part of it) and it addresses the questions you asked, especially the last paragrap.

    "Jim Steward writes a check for $1,000.00 and designates on the memo and on the church envelope that he wishes for it to be used to buy the church a new computer. After receiving the offering, Pastor Larry notices that the church has a bigger need. The rent was due 2 days ago and the $1,000.00 was exactly what they needed to pay it. He instructs his treasurer to write a church check for the rent. In this example Pastor Larry did nothing wrong. He acted in the best interest of the church. The giver gets a tax deduction because he did not apply any conditions to his contribution. Under current IRS regulation, the church has the right to use the money any way it sees fit so long as it is an honest effort to further the purposes of the church, and paying the rent is pretty important to the well being of the church.

    That seems simple enough. However, there are times when a designation must be used for the purpose for which it was given or the church could face some very serious consequences such as loss of tax exempt status and maybe even criminal charges against those responsible for not using the designated offerings properly. Let me give you an example.

    First Church decides to announce that they are going to raise money for an orphanage in South America which is in need of $9,000.00. Over the next two months they announce it from the pulpit and special offerings are taken up for for the orphanage every Sunday. At the end of the two months the church has collected a total of $7,800.00. Because the church was already suffering financially, the pastor directs the treasurer to send $6,000.00 to the orphanage and to apply the remaining $1,800.00 to desperately needed pastoral salaries. This is a classic case of misuse of designated offerings because the church announced to the congregation from the pulpit that the special offerings they were collecting were for a specific purpose. The use of these offerings is restricted because they were specifically collected for one reason. The church does not have the liberty to use the funds as it wishes.

    One amazing thing I have learned about the way many churches have used restricted offerings is that budget shortfalls have caused many a church to improperly use restricted funds to cover other bills. This type of violation also happens when love offerings are taken up for guest speakers. The church announces that they want to take up a love offering for the guest speaker but do not announce that they will only give the guest speaker up to a certain amount. After the love offering is taken up, the church gives only a certain portion of it to the guest. Ouch! The congregation believes that 100% of the offering was given to the guest speaker. Like the misuse of the funds given to the orphanage, this, too, is a crime if a pastor tells the congregation that their love offering will be given to the guest speaker, but then withholds a certain portion for the church. Not to mention that it undermines the congregation's ability to trust their leadership when it comes to handling finances."


    For complete article http://www.startchurch.com/blog/view...ated-offerings
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  4. #4
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    Quote Originally Posted by Mrs.Soprano View Post
    Someone stated to me recently that if you give a designated offering to your church (or other exempt non-profit), for instance for the building fund, that there is an IRS regulation that stipulates that the church is not in any way obligated to use your designated offering for that purpose. They may take your designated gift and spend it on whatever is chosen without alerting you in any way.

    ....
    This ain't my field of law......but I had an experience along these lines, very disturbing.

    We are in the habit of supporting the mission budget, a quite separate item in the overall budget, by designating MISSIONS for certain funds, special envelope and all that......

    The church in question, after we'd been doing so 5 years, announced one Sunday morning that the elders had decided to transfer roughly $100K from the missions funds to the general operating funds to cover a shortfall in the latter, and because there was a "surplus" in the former.

    I had a check in my pocket for that day's collections. It stayed there and we never gave another dime to that church. On top of everything else, like abused trust, outright lying, whatever......how can there ever be a "surplus" in missions funds?

    Incredible!

    legal? I do not know.

    unconscionable? yes, clearly.
    WARNING!

    These are the thoughts of a narrow-minded, opinionated, dogmatic old crank who is easily incensed by weak logic and who does not suffer fools gladly. At the same time, he is also toothless, and does not hold grudges since he cannot remember any perceived offense after his subsequent nap.

  5. #5
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    I have found out a few things on my own:

    1. If a member wants a donation to be designated and states such on his check, it is a donation which can be used in any way. Most people are uncomfortable with this and there is an implied statement which says that people should ethically be contacted to see if they mind their money being used a different way.
    2. If a member places a "written condition" on the designated gift, in addition to writing what the money is designated for, it then becomes 100% illegal for a charitable institution, including a church, to use that money in any other way.
    3. A 'written condition' would be something like, "Use this money for the church camp or return it to me."
    4. If a church votes in a policy which states that donations/designations can be used at the discretion of the church, then it is not illegal to use designated funds (w/o the written condition attached) for any purpose. No one has to be notified in this case.
    5. If a church has an announced offering - a love offering, a "let's build a playground" offering, a building fund on-going offering, or anything else that the church is raising money for, it then becomes illegal for the church to use that money for anything whatsoever than that for which it was raised.

    This is why people are able to sue a church and win if their designated money is used for something else. In the example of Jim Bakker, he was sent to jail for misappropriating funds that were given for the building of a church/ministry (air-conditioned dog houses, anyone?)
    Last edited by Mrs.Soprano; 07-29-2010 at 09:09 AM.

  6. #6
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    What you write on the envelope check (designates) is only a SUGGESTION to the church.

    Most churches have integrity and will either use the money as designated OR return it to you.

    Example: Our church did not support Jerry Falwells slick money-raising programs for Liberty Mountain. One elderly saint gave $20 to the church and designated $15 to go to Jerry, since the TV show said HE needed it more than our church.

    Two of our decons went to her, explained the church's position and belief, and said she was FREE to give $15 to Jerry, but would have to send it on her own; the church would not participate. She was HAPPY to be instructed and understand the reasoning. She took back the $20 check, tore it up, and wrote a new one for $5 to the church. Not kidding.
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    Quote Originally Posted by Mrs.Soprano View Post
    2. If a member places a "written condition" on the designated gift, in addition to writing what the money is designated for, it then becomes 100% illegal for a charitable institution, including a church, to use that money in any other way.
    3. A 'written condition' would be something like, "Use this money for the church camp or return it to me."
    A written condition also means the donation is not tax deductible for the donor. My understanding is that the IRS made this rule so that people could not benefit themselves or their pet projects. I found out about that when a former pastor mentioned he wanted to buy some books for the church library but the budget didn't allow for it. I offered to donate the sum of money for that purpose, but he said the church could not (would not?) accept the donation for a specified purpose because of the IRS rules. And that my donation would also not be deductible for tax purposes.

  8. #8
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    Quote Originally Posted by WhyEvenBother View Post
    A written condition also means the donation is not tax deductible for the donor. My understanding is that the IRS made this rule so that people could not benefit themselves or their pet projects. I found out about that when a former pastor mentioned he wanted to buy some books for the church library but the budget didn't allow for it. I offered to donate the sum of money for that purpose, but he said the church could not (would not?) accept the donation for a specified purpose because of the IRS rules. And that my donation would also not be deductible for tax purposes.
    I should have included that information about the tax deduction - thank you for including it here!

  9. #9
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    Quote Originally Posted by Mrs.Soprano View Post
    4. If a church votes in a policy which states that donations/designations can be used at the discretion of the church, then it is not illegal to use designated funds (w/o the written condition attached) for any purpose. No one has to be notified in this case.
    This is probably the case in my example. Rather than a congregational vote, there was an edict from the Elders....some time before we were there...and that's just the way it is!

    All the giving was recorded in categories and we were given an accounting semi-annually which showed amounts for "General Fund" and "Missions"...I figured that if I squawked about the fund-swapping, they would look at my totals and offer to refund what "mission" giving we had done. Since I was already a pariah there, it was easier to just leave.

    The mind-boggling aspect of this is that the "church" needs to utilize and/or depend upon IRS rules, legal maneuvers, even subterfuge in the handling of funds. Simple, straightforward dealings are not an option, apparently.
    WARNING!

    These are the thoughts of a narrow-minded, opinionated, dogmatic old crank who is easily incensed by weak logic and who does not suffer fools gladly. At the same time, he is also toothless, and does not hold grudges since he cannot remember any perceived offense after his subsequent nap.

  10. #10
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    The legal rationale is over the concern of "Money Laundering" for tax evasion purposes. The only legitimate "Designated Giving" is for a building fund according to an elder whom I had a conversation with.

    Therefore, a Church cannot be bound to honor your "Designated" offering for benevolence.

    For Example: sister bertha (single mother on limited income) threw a rod in her car so you and others in the Church are trying to help her out. The only option is for the Church to give out of the general fund or have generous indivuals forgo their tax deduction and pony up to take care of this.

    Some Churches get around this by setting up "Projects" that the members can give to but in many cases, this becomes a big, bureaucratic mess and tends to remove the "Human Heart" from the matter!

    IMO, this is one of the downfalls of the 501(c)3 entity that we are so enslaved to these days. Not rabidly opposed to 501(c)3 incorporation (PLEASE understand this) but this is something that often keeps the Church from being the CHURCH!!!

 

 

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