Nonprofit Law/Benevolent gift to church member
Our church member had a double lung transplant an is in need of funds to assist in paying his caregiver and lodging for 3 months . Our church does have a benevolent committee. We want to gift him $8500 for those expenses. How can we gift him the funds directly to the member without the member incurring a 1099 at the end of the year? Thanks for your prompt response. The member is not an employee or board member.
The Internal Revenue Code at section 102(a) provides that gifts are not income. "Gross income does not include the value of property acquired by gift..."
However, section 102(c) of the Code has "Subsection (a) shall not exclude from gross income any amount transferred by or for an employer to, or for the benefit of, an employee...."
Therefore, if the church member is not an employee or in the family of an employee of the church the payment of $8500 is treated by the IRS as a gift and no tax filings need to made by Form 1099-Misc for gifts.
You did not ask, but I suggest that the other members of the church get together to solicit the $8500 funds and hold them and the church not get involved. Otherwise, the church's 501(c)(3) organization status may be jeopardized. See http://www.irs.gov/pub/irs-pdf/p3833.pdf
starting on pdf page
13 as to the discussion of "Charitable Class"
--start of excerpt ---
The group of individuals that may properly receive
assistance from a charitable organization is called a charitable
class. A charitable class must be large or indefinite enough that
providing aid to members of the class benefits the community as a
--end of excerpt ---
As church benevolence funds generally go only to members of a small
congregation and not to members of the community as a whole, the
church's activity of giving funds to its congregation, jeopardizes
its exempt status.
Revenue Ruling 56-304 has:
--- Start of Excerpt ---
Organizations privately established and funded as charitable
foundations which are organized and actively operated to carry on
one or more of the purposes specified in section 501(c)(3) of the
Internal Revenue Code of 1954, and which otherwise meet the
requirements for exemption from Federal income tax are not
precluded from making distributions of their funds to individuals,
provided such distributions are made on a true charitable basis in
furtherance of the purposes for which they are organized.
However, organizations of this character which make such
distributions should maintain adequate records and case histories
to show the name and address of each recipient of aid; the amount
distributed to each; the purpose for which the aid was given; the
manner in which the recipient was selected and the relationship,
if any, between the recipient and (1) members, officers, or
trustees of the organization, (2) a grantor or substantial
contributor to the organization or a member of the family of
either, and (3) a corporation controlled by a grantor or
substantial contributor, in order that any or all distributions
made to individuals can be substantiated upon request by the
Internal Revenue Service.
---End of Excerpt---
(cited with approval in IRS instructions for Form 1023 Application
for Exemption on pdf page 23 middle column) at:
Attorney at Law
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. For me to consider your individual situation and how the law applies, I would need to gather more information.