Benevolence fund definition
/What is a Benevolence Fund?
A benevolence fund is used by a church to support those in the local community who are in need. Because the church is deciding who receives funds, rather than donors, contributions to this fund are tax-deductible for donors. For example, a member of a church congregation is battling cancer, so others in the congregation want to funnel donations through the church to pay this person’s medical bills. These are classified as pass-through donations, because the church is not given control over how the donations are to be directed. According to the IRS, pass-through donations are not tax-deductible for donors. By instead directing the donations into a benevolence fund, the church retains control over how the funds are directed, which makes the donations tax-deductible.
Examples of Benevolence Funds
Here are three examples of benevolence funds that a church might use to support those in need in the local community:
Emergency assistance fund. This fund is dedicated to helping individuals and families facing unexpected crises, such as job loss, medical emergencies, or eviction threats. It can be used to cover essentials like rent, utility bills, groceries, or emergency medical expenses, providing immediate relief during difficult times.
Food pantry fund. A food pantry fund supports the operation and stocking of a church-run food bank, providing free groceries to community members struggling with food insecurity. Donations to this fund help purchase non-perishable items, fresh produce, and essential supplies to distribute to those in need.
Disaster relief fund. This type of fund is designated for aiding victims of natural disasters, such as floods, hurricanes, or fires, within the community or nearby areas. It can be used to provide temporary housing, clothing, and basic necessities, as well as to assist with cleanup and rebuilding efforts.
These examples illustrate how benevolence funds can be tailored to address various needs within a community, offering practical support and compassion through the church’s outreach programs.
Benevolence Fund Operational Requirements
To operate a benevolence fund, a church should have the following administrative details in place:
Define purpose. State exactly what types of local needs the fund will provide assistance for, such as food and paying for utilities.
Define lack of resources. Define the financial circumstances of the recipient that will trigger a payment from the fund, such as being unemployed or below a certain income level. The required threshold levels should be clearly stated.
Approval process. Define who must approve expenditures from the fund, such as a designated committee or the minister. This may also include a formal application for assistance, which is useful for proving that a standard process is being followed.
Check payments. Where possible, make checks payable to the suppliers to whom the designated person owes money, rather than directly to him or her; doing so ensures that funds are not mis-spent.
Documentation. Maintain records for what was spent and to whom it was given. The documentation should include any applications for assistance that were submitted by funding recipients.
Benevolence payments made to an employee of the church are taxable to the employee as wages, and so should also have payroll taxes withheld from them. The same rule applies to any expenses paid on behalf of an employee.