The topic of this thread unfortunately addresses two concerns that are closely related - proper use of the Other account and tax laws. The predominant issue is the purchase of goods for needy families for Christmas. From that issue there are two methods discussed so far for collecting funds for this purpose. The first is using the Other account and the second is the bishop accepting the donations but not recording those donations in MLS, purchasing the goods, and then distributing those goods.
While the purchase of goods for needy families can result in a tax benefit for the donors, that should not become the focus of the discussion in this thread. Whether or not there is a tax benefit for the donors is between them and the taxing authorities. The Church does not provide tax statements for contributions to the Other account simply because it is impossible for the Church to determine whether the purpose of the contribution would qualify for tax favored status or not. I would venture a guess that most of the time it would not qualify simply because the primary purpose of the Other:Authorized Member Financed Activities account is to collect funds for a defined purpose and then distribute the funds to pay for goods or services.
In the scenario being discussed for Christmas welfare to needy families it has potential to be a tax favored donation. But we do not need to get bogged down in that aspect for the purpose of addressing the method of collecting the funds in this thread. We should be concerned with what is in accordance with Church policies and procedures and in protecting the Church's tax exempt status and protecting the leaders of the Church.
The discussion should focus on what is the best method is of collecting the funds and then purchasing the goods. I addressed the tax issue only to ensure we understand that there can be negative tax consequences for the Church, and possibly the bishop, if handled improperly. Having no record of the collection and distribution of those funds as has been suggested has potential for negative consequences for both the bishop and the Church. I do not want to suggest or imply how donors should or may address the tax favored status of their donations. I am only concerned with protecting the Church leaders and the tax exempt status of the Church. Following Church policies and procedures ensures that protection.
allenjpl wrote:But the other criteria of a passthrough account is that is for a paid-for benefit. The inherent problem with Christmas accounts is that the status of the money is ambiguous.
The paid for benefit is for goods in behalf of donors to be given to needy families. I don't think the status of the money is ambiguous. It is clear that the bishop will purchase goods and then distribute them for and in behalf of the donors. Just because the recipients of those goods are not defined in the name of the sub-category does not make it ambiguous. If necessary the name of the family can be entered into the description of the purpose of each check. I do agree that the name of the Christmas account should reflect its purpose and not simply be titled "Christmas Fund". It could be "Christmas Gifts for Needy Families" or anything that makes it less ambiguous.
allenjpl wrote:Since Tithing Settlement had mostly been completed by the time Christmas rolled around, the first time some people noticed that their Christmas account donations weren't charitable was when I handed them their tax statements. I was then placed in the uncomfortable position of trying to explain that it really wasn't a charitable donation, but a payment for gifts/whatever (because I had no idea what the bishop planned for these funds).
Even after I stated we do not need to get bogged down in the tax status of a donation, I think some aspects of that issue should be addressed.
Simply because a donation to an Other account is not reported on a tax valid statement does not mean it cannot be treated as a charitable contribution. Whether or not it is a charitable contribution is for the donor to decide. In the U.S. the tax valid statement is not the only valid document for reporting contributions less than $250. This is the area we do not need to get bogged down in.
The proper response when someone is concerned about the tax favored status of a donation is for them to seek tax advice from a tax specialist. We should not make statements about the tax status of a donation unless we are tax specialists. In the case we are discussing it very well could be considered a tax favored charitable contribution. If a donor is expecting their contribution to be treated as a charitable contribution then I would recommend to them to not contribute to such a purpose without first seeking tax advice from a tax specialist.
An announcement made over the pulpit could include a disclaimer that the contributions will not appear on the tax valid statement and that the contribution may or may not be considered a charitable contribution. The disclaimer should also include the caution that tax advice should be sought from a tax specialist to determine whether contributions would qualify as a charitable contribution.
Note that I have not stated that it is appropriate to use the Other account for the purpose described by the OP. That decision rests with the local leaders. If the bishop is uncertain he should seek council from the stake president. The stake president can then seek council from the area auditor or other appropriate area authorities.
I am emphatically stating it is risky for the bishop to collect funds without proper records for the purpose described in the OP. The only way I know to maintain proper records for donations is in MLS using procedures outlined in the Handbook.