We receive several questions each year regarding designated or restricted contributions. Designated contributions are contributions made to a church or ministry for a specified purpose or program. The donor may designate a specific project or a specific individual relating to the contribution. Whether or not the contribution is deductible for income tax reporting depends on the type of designation and whether the Church has control and discretion over the contribution.
The following are several examples...
1. Donor Jones designates a contribution for the mission program of the Church. The Church has control and discretion over the contribution and the mission program supports the exempt purpose of the Church. This contribution is deductible.
2. Donor Brown designates a contribution for Student Smith for a mission trip. The Church has full administrative control and descretion over the contribution and the mission trip supports the exempt purpose of the Church. The contribution is deductible.
3. Donor Williams designates a contribution for John Doe. The contribution is not deductible.
4. Donor Smith designates a contribution for Student Smith a ski trip. Student Smith is Donor Smith's child. The contribution is not deductible, and resulted in a personal benefit to Student Smith. The ski trip does not support the exempt purpose of the Church.
The Church must have administrative control of the contribution and the related activity should support the exempt purpose of the Church.
