During his ministry Jesus was asked an important question, “Is it lawful to pay taxes to the emperor or not?” The question was a loaded one because a negative reply could be viewed as an act of sedition. To answer the question, “Of course it is lawful to pay taxes,” could only infuriate the local Jewish nationalists.
Jesus saw the question for what it was, a trap. However, Jesus proceeded to instruct his disciples about the importance of both civil and ecclesial authority. He demanded to see a coin, and when he received the denarius he asked, “Whose head and whose title does it show?” My guess is that no one had to look at the coin to know that it was the emperor’s likeness depicted on the coin. To which Jesus said, “Give therefore to Caesar the things that are Caesar’s and to God all the things that are God’s.”
Throughout history the church has relied on this text to support the importance of both contributing to the church and paying one’s lawful taxes. Today we might take it one step further by saying, “Either render to the authorities the documentation they require or pay the tax that is owed.”
Ask David and Veronda Durden about the importance of providing the exact documentation required to support charitable contributions. On May 17, 2012, the U.S. Tax Court ruled in favor of the Internal Revenue Service, which had previously denied $22,517 of the Durdens’ itemized deduction for charitable contributions stemming from the Durdens’ 2007 tax return.
Why the denial? Had the Durdens not made actual charitable contributions? No, there were adequate banking documents to support the actual dollar amount contributed. Was the Durdens’ church not considered a charity for which contributions could be deducted? No, the authenticity of the charity was never questioned.
The sole reason for the denial was that the Durdens had failed to provide a contemporaneous written acknowledgement of individual contributions of $250 or more (Durden v. Commissioner, T.C. Memo, 2012-140 issued May 17, 2012.) Such acknowledgement must include the date and amount of the contribution as well as a specific statement whether goods or services were provided in consideration of the contribution (§170(f)(8)(A) and (B). The Durdens had receipts from their church for the contributions in question but there was one glaring omission. There was no explicit statement with the language, “Except for intangible religious benefits, no goods or services were provided to the donor in exchange for the contribution received.”
Following the audit in which the charitable contribution was denied, the Durdens requested and received a new receipt from their church including the necessary language. Still, the deduction was denied. Why? Because the Tax Code passed by Congress requires the documentation to be contemporaneous. An acknowledgement is contemporaneous if received by the taxpayer before (1) the date the tax return is filed or (2) the due date for filing the original return §170(f)(8)(C). In other words, do not wait for an IRS audit to get the right receipt. It will be too late.
What are the lessons to be learned from this case? The primary one is that both churches and contributing members are responsible for the correct and complete documentation required for a donation to the church.
Churches: It is your responsibility to provide contributors with proper receipts. Most church software utilized to track contributions allows for a footer message in which it would be easy to provide the necessary statements required by the Tax Code. Regularly send monthly or quarterly statements including the details of every contribution (not just those of $250 or more). Provide separate receipts for any monetary receipts involving a good or a service.
Individuals: The IRS holds you responsible for having in your possession the required receipt before you file your tax return. Don’t have such a receipt? Call your church and ask for one.
NANCY J. EMERSON is a teaching elder in the Presbytery of the Northern Plains and teaches accounting at North Dakota State University.
