Most church treasurers and donors are familiar with the law concerning substantiation of gifts given to churches that are in excess of $250, as discussed immediately above. As noted, if a donor gives any one gift that is in excess of $250, the church must provide a receipt to the donor for the gift before the donor can claim such as a charitable contribution on his or her tax return. The receipt can be provided contemporaneous with the gift or the church can provide a regular accounting of all gifts over $250 (as well as other gifts) once a year or once a quarter. For gifts under $250, the church has previously not been required to provide substantiation of the gift, even if the combination of all the gifts exceeded $250. For gifts under $250, the donor has been able to use their own records to substantiate those gifts. However, effective January 1, 2007, substantiation of gifts under $250 changed.
The Pension Protection Act of 2006, among other things, provided that no charitable deduction is allowed after January 1, 2007 for any contribution unless the donor maintains as a record of such contribution a bank record or a written receipt from the church showing the name of the church organization, the date of the contribution, and the amount of the contribution. Simply stated, this provision did not change the substantiation requirement for contributions in excess of $250. Those gifts must still be substantiated by an appropriate receipt from the church, and a cancelled check is not sufficient. However, for gifts less than $250, for the donor to be able to claim such as a charitable contribution, he or she must have either a cancelled check showing the donation or a written receipt from the church denoting the gift.
Because of this change, instead of placing a few dollars in the collection plate, donors may want to write a check even for their smaller donations. The other option is for the local church to record by donor all cash contributions made through the church “envelope” system. Of course, this places more pressure on churches to maintain accurate records of contributions of all sizes, not just those over $250. Again, this provision is effective for all contributions made after January 1, 2007.