#4 Contributions - General Requirements

Since the beginning of the year, we have been discussing the general requirements for reporting contributions. In this post we will discuss when to record a contribution.

When is the unconditional transfer considered a contribution? When does the church record a contribution? The timing or delivery of the unconditional transfer is very important in determining how/when to record a contribution.

Let’s review the following:
a. Checks that are mailed to a church are considered “delivered” on the date the donor mails it or the date of postmark.

b. Checks that are delivered in person are considered a contribution at the time of delivery. Checks that are postdated are basically considered to be a promise to pay and should be treated like a promissory note. The church should retain the check until the date and then deposit the funds and record the contribution.

c. Contributions charged on the donor’s bank credit card are recorded in the year the charge is made.

d. If an individual utilizes a pay-by-phone account, the date the financial institution pays the amount is the date of contribution.

e. If stock is donated to the church, the contribution is recognized when the properly endorsed certificate is mailed/delivered to the church or the church’s agent. However, if an individual gives a stock certificate to their agent or to the issuing corporation for transfer to the name of the church, the gift is not completed until the date the stock is transferred on the books of the corporation.

f. If an individual issues a promissory note to a church, it is not a contribution until the payments are made.

g. If an individual makes a contribution with borrowed funds, the contributions are recorded when received, regardless of when the loan is repaid.

h. If a contribution is a conditional gift that depends on a future act or event that may not take place, a contribution cannot be recognized unless there is only a negligible chance that the act or event will not take place.

Here’s an example: Individuals donate cash to a church to help build a new educational wing. The church needs $250,000 to build the wing. The church will refund the contribution if the $250,000 is not raised. The contribution is not recognized until the $250,000 has been raised.

Churches may recognize contributions when received, if the transfer is “unconditional”.

As you can see, it is important to determine when the Church receives the unconditional transfer. See our next post regarding the amount that can be deducted by the donor.

Posted by Floyd Langley & Kirk Vanderslice