Nonprofit Law/Missing Receipts

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Question
Our church has weekly deliveries from a local grocery store of Sunday morning ministry supplies.  Although I've asked multiple times, the grocery store fails to include the weekly receipts with our monthly invoice.  The charges are each week and vary little in amount.  Our Finance Committee agreed that it was fine to pay such charges (assuming they are fit the regular pattern in date and amount) but our bookkeeper says that the IRS states we must have receipts and cannot pay the bill without them.  While I know best practices say we should have receipts is that actually and IRS regulation?  I live in Ohio, if that makes a difference.

Answer
The IRS has regulations as to documents to verify expenses and those apply equally to for-profit and exempt organizations.  A church is generally considered an exempt organization and, therefore, the IRS may be concerned that the church is distributing its funds to the owner of the grocery store.  

Internal Revenue Code section 501(c)(3) which is available at
http://goo.gl/7lFll (on page 2, first column)
has, in part, that the 501(c)(3) organization must be "operated
exclusively for religious, charitable ...or educational purposes
... no part of the net earnings of which inures to the benefit of
any private shareholder or individual".

The term "private shareholder or individual" is defined in
regulations 26 C.F.R. 1.501(a)-1(c) "The words `private shareholde
or individual' in section 501 refer to persons having a personal
and private interest in the activities of the organization."
http://goo.gl/GtQpz on the right column of page 2

I am assuming the grocer is not such an person, but, nonetheless, an exempt organization may not give private benefits (other than to charitable beneficiaries).

Therefore, if audited, the church would need to provide to the IRS sufficient evidence that the payments to the grocer are for goods. You would need a receipt indicating that the church received goods for the payment.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Burden-of-Proof

However, there is no hard-and-fast rules for what they would accept for proof of the purchase of supplies from the grocer:
--- Start of Excerpt ---

Expenses are the costs you incur (other than purchases) to carry on your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include the following:
Canceled checks
Cash register tapes
Account statements
Credit card sales slips
Invoices
Petty cash slips for small cash payments
--- End of Excerpt ---
http://goo.gl/Ed3rqr

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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