1. ©2014 CliftonLarsonAllen LLP CLAconnect.com See CLA PowerPoint User Guide for instructions to insert an image or change the icon on the business card. Find it at the bottom of the myCLA / Firm Resources / Materials / Templates page. See CLA PowerPoint User Guide for instructions to insert an image or change the icon on the business card. Find it at the bottom of the myCLA / Firm Resources / Materials / Templates page. Contributions: What Religious Organizations Should Know June 25, 2014

2. ©2014 CliftonLarsonAllen LLP Disclaimers To ensure compliance imposed by IRS Circular 230, any U. S. federal tax advice contained in this presentation is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed by governmental tax authorities. The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by CliftonLarsonAllen LLP to the user. The user also is cautioned that this material may not be applicable to, or suitable for, the user’s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The user should contact his or her CliftonLarsonAllen LLP or other tax professional prior to taking any action based upon this information. CliftonLarsonAllen LLP assumes no obligation to inform the user of any changes in tax laws or other factors that could affect the information contained herein.

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4. ©2014 CliftonLarsonAllen LLP About CliftonLarsonAllen A professional services firm with three distinct business lines –Accounting and Consulting –Outsourcing –Wealth Advisory 3,600 employees Offices coast to coast Nonprofit group serves 6,000 clients across the country

5. ©2014 CliftonLarsonAllen LLP Speaker Introductions Barb DuBois Barb in a Principal in our St. Louis office. With more than 30 years of experience, Barb spends most of her time serving nonprofits and their related auditing, accounting, reporting and consultation needs. Jeff Parker Jeff is a Tax Director with CliftonLarsonAllen. Jeff is responsible for tax compliance, research, and planning for various entity types, with a focus on nonprofit organizations.

6. ©2014 CliftonLarsonAllen LLP Learning Objectives To provide your religious organization with knowledge related to: What qualifies as a contribution. What are your fiduciary responsibilities as the donee when the contributions aren’t cash. What gifts your members can claim as charitable deductions..

7. ©2014 CliftonLarsonAllen LLP Six Requirements a Charitable Contribution Must Satisfy A gift of cash or property Claimed as a deduction in the year in which the contribution is made Unconditional and without personal benefit to the donor Made “to or for the use of” a qualified charity Within the allowable legal limits Properly substantiated

8. ©2014 CliftonLarsonAllen LLP A Gift of Cash or Property Gifts of property are deductible as contributions such as Real Estate Stocks and Bonds Automobiles Art Collections Insurance policies Inventory

9. ©2014 CliftonLarsonAllen LLP Donated Services are NOT Deductible Donation of professional services are NOT deductible by the individual For the Donee Organization to record in-kind professional services as contribution revenue and related expense, the services must be those that the Organization would not otherwise be able to provide without purchasing them and must include a service that requires expertise. Unreimbursed expenses of the donor individual may be deductible such as out-of-pocket expenses (mileage, lodging, required supplies, etc.)

10. ©2014 CliftonLarsonAllen LLP Rent-Free Use of a Building As an individual or business, you cannot claim or deduct the value of rent-free building space provided to a charitable organization. However, as the religious organization, if you are receiving rent-free building space, you should identify the fair market value of that space and record contribution revenue and rent expense in your financial statements. 10

11. ©2014 CliftonLarsonAllen LLP Charitable Contributions Must be Claimed in the Year They are Delivered Exception – It is deductible in year 1 if the check is mailed and postmarked in year 1, even if it is received early in year 2 by the church. However, if the check is dated in year 1, but delivered to the church in year 2 (no mailing, no post-mark), then it is deductible in year 2. This practice is also the same for contributions made on your credit card.

12. ©2014 CliftonLarsonAllen LLP Unconditional and Without Personal Benefit To make a charitable contribution, that is deductible, the donor must made a gift that absolutely and irrevocably transfers title, dominion and control over the gift. The charitable contribution must be unconditional. No direct or material benefit may inure to the donor. If the donor does receive a benefit in exchange for a contribution, then the charitable contribution deduction is limited to the extent that the cash or property transferred by the donor exceeds the fair market value of benefit received in return. **Benevolence Fund – consider establishing such a fund to receive donations. 12

13. ©2014 CliftonLarsonAllen LLP Donor Gifts with Restrictions and/or Fiduciary Responsibility Religious organizations should implement a gift acceptance policy. A gift acceptance policy would govern what types of gifts the organization would accept, and should consider the affects of acceptance of such gifts on its fiduciary responsibility to meet any restrictions imposed by the donor as to purpose or time (restricted gifts) or endowment gifts whose corpus is to be maintained in perpetuity and only the earnings used therefore. 13

14. ©2014 CliftonLarsonAllen LLP Donor Gifts with Restrictions and/or Fiduciary Responsibility(Continued) The Uniform Prudent Management of Institutional Funds Act of 2006 (“UPMIFA”) –Adopted in 47 states, with minor variations. –UPMIFA includes provisions to govern the release and modification of restrictions on charitable funds to permit more efficient management of these funds. –UPMIFA applies to churches and religious organizations who receive and hold funds for a charitable purpose. –UPMIFA should be consulted when an Organization has accepted charitable funds with a restriction and determines it may not be able to honor the donor’s restrictions and is unable to obtain the donor’s release from the initial restrictions on the gift. –UPMIFA should be consulted when the Organization has an endowed gift, in which it may desire to use some of the original historical gift (corpus). 14

15. ©2014 CliftonLarsonAllen LLP Contributions Made To Or For The Use Of A Qualified Organization Qualified Organizations must satisfy all of the following requirements: –Created or organized in the United States or U.S. Possession. –Organized and operated exclusively for religious, educational, or other charitable purposes. –No part of the net earnings or which inures to the benefit of any private individuals; and –Not disqualified for tax exempt status under section 501(c)(3) by reason of attempting to influence legislation, and which does not participate or intervene in any political campaign on behalf of any candidate for public office. 15

16. ©2014 CliftonLarsonAllen LLP Contributions made to Foreign Charities or Missionaries –Contributions made directly by church members to a foreign church or ministry is not tax-deductible –Church members can deduct a designated contribution made to their Church, and then the Church can make a contribution to a foreign charity –However, the Church member cannot require/restrict that the Church make the contribution to the foreign charity. –Church members can deduct designated contributions made to their Church, in support of a Church’s Mission Fund or Missionaries that may be serving in foreign countries as long as the Church maintains control of the related expenditures. –Mission Trips – If you desire to participate in your Church’s sponsored mission trip, the Church should establish the “cost of the mission trip” and have control over the related expenditures (i.e. pay travel, lodging, food, etc.,). Then, you can make a contribution for the trip to the Church that qualifies as a tax-deductible contribution for you personally. 16

17. ©2014 CliftonLarsonAllen LLP Amount of Deductibility-Ordinary Income Property –Ordinary Income Property ◊ Amount of deductible contribution is normally the amount that would have been ordinary income or short-term capital gain if the property had been sold at its fair market value. ◊ This generally limits the deduction to the donor’s basis in the property. ◊ Ordinary income property includes stocks, bonds, jewelry, coins, cars and furniture held for one year or less. 17

18. ©2014 CliftonLarsonAllen LLP Amount of Deductibility – Capital Gain Property Capital Gain Property – –Includes capital assets held more than one year. –Capital assets includes most items of property that are used for personal purposes or investment such as stocks, bonds, jewelry, coin/stamp collections, cars, furniture or real estate used in the donor’s business. –In general, donors who contribute capital gain property, can claim a charitable deduction in the amount of the property’s fair market value at date of gift. –Exception - In some situations the donor must reduce the fair market value to an amount that would have been long-term capital gain if property had been sold for its FMV. 18

19. ©2014 CliftonLarsonAllen LLP Substantiation Donor must retain a bank record of the cash contribution showing the charity’s name, date/ and amount of the contribution. The Charitable Organization must provide a written communication show the charity’s name, date of the contribution and amount of the contribution from the donor for cash contributions of $250 or more. 19

20. ©2014 CliftonLarsonAllen LLP Substantiation Charity’s written donor acknowledgement must include one of the following: –Statement that no goods or services were provided by the charity in return for the contribution, if that was the case, or –Statement of description and good faith estimate of the value of goods or services, if any, that the charity provided in return for the contribution, and –Statement that goods or services, if any, that the charity provided in return for the contribution consisted of intangible religious benefits, if that was the case. 20

21. ©2014 CliftonLarsonAllen LLP Substantiation is the Donor’s Responsibility The Substantiation Rule imposes on the Donor the responsibility to obtain the obtain written documentation as required in order to itemize deductions However, Churches should take an active role and provide the proper substantiation written acknowledgements to their donors in a timely manner to allow deductibility. 21

22. ©2014 CliftonLarsonAllen LLP Substantiation Requirements of Individual Contributions of Noncash Property over $5,000 To claim a charitable contribution for noncash property over $5,000, the donor must satisfy all of the following: –Obtain a qualified appraisal, –Prepare a qualified appraisal summary and include it with his tax return submission (form 8283), –Maintain records, such as described above (written acknowledgement from charity, amount, date, description of property).. 22

23. ©2014 CliftonLarsonAllen LLP Substantiation – Remember…….. There are 10 rules for substantiation of charitable contributions Substantiation rules vary depending on the amount of individual donor’s cash contributions Be aware of quid pro quo rules Rules on Individual contributions of noncash property valued by the donor at less than $250 vary from noncash property valued by the donor at $250 to $500 and on those at more than $5,000 Rules are different on donations of (a) cars, boats and planes; (b) stocks; and (c) clothing/household items. 23

24. ©2014 CliftonLarsonAllen LLP 24 ©2014 CliftonLarsonAllen LLP CLAconnect.com twitter.com/ CLAconnect facebook.com/ cliftonlarsonallen linkedin.com/company/ cliftonlarsonallen Questions and Thank you Harold Parsons, CPA, Principal harold.parsons@CLAconnect.com 612-397-3058 Barb DuBois, CPA, Principal barb.dubois@CLAconnect.com 314-925-4414 Jeff Parker, CPA, Tax Director jeffrey.parker@CLAconnect.com 618-310-2006