By Shauw Chin Capps, CBF Chief Development Officer & CBF Foundation President
Gifts in-kind or gifts of non-financial assets are a very tricky component of church giving. These types of gifts certainly have the potential to be a win-win for both the donor and the congregation, IF the gift matches a very specific need the church has. At the same time, there are lots of misconceptions about this type of giving.
First, it is important that a church decides what types of in-kind gifts they would accept because opening the doors for anyone to contribute in-kind gifts can lead to an unmanageable situation. The best way is for the church to initiate the ask for a specific in-kind gift only when it needs it. For example: A church asks its members to donate a fridge that is needed in the newly renovated youth room.
Equally important is the acknowledgement (or the tax receipt letter) that the church provides for in-kind gifts. The acknowledgement must NOT include the valuation of the gift. By law, nonprofit organizations, including churches, cannot provide a donor with the dollar value of an in-kind gift. Such valuations, when applicable, relative to “fair market value” of in-kind gifts, need to be professionally assessed and certified elsewhere—if they can be—and that is the responsibility of the donor. This certification subsequently needs to be resolved with the professionals who prepare the donor’s tax forms—whose work in turn will need to be reconciled with IRS regulations.
It is also important to note that instances where time and service are donated, no tax break whatsoever is allowed, as the IRS Publication 526 clearly states, “You cannot deduct the value of your time or services…” This often trips up donors who expect their gifts of time and expertise, when donated, to be tax deductible. It may seem unfair, but it’s the law. Churches should still thank donors for in-kind gifts and do it in a way that speaks to how the gift helps to advance the mission of the ministry.
Finally, if a member of a church wants to donate their expertise/service to the church, the best thing to do is advise them to talk to their accountant first so that expectations around tax deductions are clear.
Again, in kind gifts have great potential for churches but they also must be treated with extra care and attention.
A concluding practical tip for congregations may be to host a “Lunch & Learn” session about tax savvy and creative ways to give particularly if your church includes a financial advisor/planner as a member who could lead the session. An educational session like this can help increase your church members’ imagination about different ways of giving that can have the potential to increase overall generosity toward your church.