Are “love offerings” to preachers always taxable income?
That question, which has bedeviled churches for decades, made headlines once again in the May tax-evasion conviction of Charlotte, North Carolina, pastor Anthony Jinwright and his wife, Harriet.
The co-pastors of Greater Salem City of God said they’d been confused about whether money from speaking fees and anniversary collections was taxable. But the IRS and federal prosecutors argued that the couple had received so many warnings that their failure to report more than $2.3 million in taxable income from 2002 to 2007 was clearly willful.
Financial consultant Robert Howze issued some of those warnings. He said other congregations around the country are struggling with questions about love offerings.
“It’s not much talked about,” he said, “but the confusion is there.”
Richard Hammar, editor of Church Law & Tax Report, agrees.
“There’s confusion in the minds of a lot of pastors,” he said, “but there’s no confusion about the tax statutes that apply …. It’s almost impossible for love gifts from the church to be non-taxable.”
If the gift is given out of a “detached and disinterested generosity”—dollars handed to a homeless man, for instance—it would be non-taxable income, he said. But if it can be construed as payment for services rendered, it’s taxable.
Hammar, an attorney and CPA, said congregants often get confused because they give such offerings simply “to bless the pastor.” So why, they ask, should the IRS be involved?
“The problem is, the gift is being made in the employment context,” he said. In such context, “it’s almost impossible to isolate that from services rendered.”
Dan Busby, president of the Evangelical Council for Financial Accountability, said churches should realize that large sums of money or multiple love offerings per year can draw IRS scrutiny if not reported as income to the pastor. “Churches and pastors need to be aware that this is an issue.”
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Related Elsewhere:
Previous Christianity Today articles on taxes include:
More Giving, Less Taxing | President Obama’s tax plan will hurt the very people he’s trying to help. (May 14, 2009)
Endorsing from the Pulpit | Pastors launch challenge of IRS rules on endorsements. (September 25, 2008)
IRS Changes May Dent Ministries’ Car-Donation Programs | New deduction rules dump Blue Book for actual sales value. That could discourage donors. (December 1, 2004)
