Benevolence is defined as an act of kindness or generosity. Church benevolence programs are those that provide for the basic necessities of life to needy persons. This would include food, clothing, shelter, medical care and other types of assistance to the poor or destitute. A church can give cash to a needy person from the benevolence fund; however, as with all other benevolent gifts, the purpose of the funds must be to provide for the basic necessities of life. For example, a church could make a cash gift to a family who recently suffered a loss due to death or natural disaster. The family could then use the funds to pay for groceries, rent, transportation and other necessities.
The reason the classification of a gift as benevolence is so important is because benevolence is not taxable to the recipient. Normally, all other types of payments to individuals are some form of taxable compensation: wages, salary, honorariums, contract labor, payments for professional services, etc. Even gifts for birthdays, holidays, or special occasions are taxable if the value of the gift exceeds $25. Benevolence, however, is never taxable to the recipient because it is considered a charitable program of the church.
For this reason, the church must take steps to ensure that all benevolent gifts are made for only the basic necessities of life and only to those who are needy. Persons related to the church (employees, pastors, board members, and family members) should never be given benevolence payments. Those who control a tax exempt organization should never take tax-free money from the organization. All payments to employees, pastors, board members and members of their families should be treated as some type of taxable compensation.
It is recommended that each church establish its own written benevolence policy. An appropriate policy would include the following:
1. Description of the purpose of the benevolence program (e.g. to provide support to the poor and needy).
2. Criteria to be used to determine whether a person qualifies to receive benevolent gifts (e.g. income limitations, distressed situation, loss of job, death in the family, etc.).
3. Identify employee or pastor of church who is responsible for approving benevolent gifts.
4. Identify amounts or types of gifts that can be made without approval from the Board.
Whenever payments are made from the benevolence fund, the church should maintain documentation to show that the benevolence policy was followed. This can be accomplished through the use of a form that includes the following information:
1. Name and address of individual receiving benevolent gift.
2. The reason for the payment.
3. The relationship, if any, of the recipient to the church (i.e. are they related to individuals who control the church?).
4. Approval by person responsible for benevolence program.