Thursday, December 27, 2018
Hey Fletch … How do churches handle Benevolence Fund needs when a staff member is the candidate? The Board is trying to find out how other churches handle benevolence for a staff hardship.
DRF—I did some research and did not find any policies on benevolence gifts for staff members. This does not mean that churches don’t do such gifts (pardon the double negative). It just means that not many have written a policy on such gifts.
There may be a new wrinkle on this issue. See the XPastor article, New Tax Court Case Says “Gifts” to Pastor Are Taxable by Mike Batts. Time will tell if this also applies to benevolence gifts.
Let me reach out to Michael Martin, Vice President of the Evangelical Council for Financial Accountability. He is both a CPA and an attorney. As I recall, many benevolence gifts are taxable income to staff members.
Michael—It is possible for employees to benefit from a church benevolence fund. However, in order not to be considered taxable income, it must be administered in accordance with a formal employee assistance program.
CapinCrouse has an article on the ECFA site and here’s a relevant excerpt: “Benevolence program disbursements to employees also require special considerations. To give benevolence funds to an employee without having to show it as taxable income on their W-2, you need to have a formal hardship assistance plan in place before the assistance is given. See IRS Publication 3833 for the requirements of a hardship assistance plan.”
We don’t have a sample on employee hardship assistance programs. Just my two cents … most churches probably go the route of taxing employee benevolence payments on the relatively rare situations when they come up, rather than going through the hoops of setting up a formal hardship program.