How to Legally Help the Poor

By Raul Rivera

As Pastor James was on his way home from Sunday morning service, he noticed a gentleman holding a sign at a traffic light. Without having to read the sign Pastor James could tell that life had not been fair to the man. The man’s clothes, hair and demeanor told his story.

While sitting at the traffic light, Pastor James’ heart went out to the man and he wanted to help, but he was not sure how. Pastor James asked himself, “Should I just give him money?”, “Can I give him church money?”, “Can I use the church credit card to buy him necessities?”

Unsure of what to do, Pastor James continued on his way home when the traffic light turned green, but while in route he decided that he would not be caught off guard again when it came to helping those in need. 

Do you have a plan to help the “least of these?”

Throughout the Gospel, we often find Jesus teaching about the kingdom of God. In Matthew 25, Jesus tells a story about a shepherd sorting sheep to his right and goats to his left. He is comparing them to the individuals that God will one day set aside on His right and left.

In this passage, we read that the people on God’s right were the ones who fed, clothed, and gave shelter to the “least of these.” The ones on God’s left were those who failed to feed, clothe, and give shelter to the “least of these.”

Jesus then takes it one step further by stating that what they did and did not do to the “least of these” was as if they did or did not do it to Jesus Himself! 

When we read this teaching or when we hear a sermon given on this passage, we are often eager to meet the needs of everyone in which we come in contact. We charge our churches and congregations to be more generous and more giving. 

And while it is good for you and your church to be more generous and giving, before jumping in head first, I have one question for you:

“Does your church or ministry have a plan in place that fosters a healthy and responsible benevolence program?”

We are the hands and feet of Christ

As the Body of Christ, we are called to meet the needs of those not only in our churches, but also those within our communities. Through acts of love, kindness, and generosity we become the hands and feet of Jesus. This is commonly referred to as benevolence.

While generosity and benevolent acts seem to be a part of the Church’s DNA, it is common for many churches to give benevolence without a comprehensive plan. 

The truth of the matter is that how your church gives to the “least of these” matters.

Because of this, I want to show you how your church can create a successful benevolence program that not only meets the needs of those in your community, but one that also meets the requirements of nonprofit law. (We offer a resource to help you establish a benevolence program in your church.)

However, before we do that, you need to understand how the IRS defines benevolence and who qualifies for it.

Understanding the legal definition of benevolence

Using a Supreme Court decision (see Commissioner v. Duberstein), the IRS defines benevolence, under Internal Revenue Code section 102, as a gift given from “detached and disinterested generosity” and out of “charity or like impulses.” 

This current interpretation of benevolence allows the recipient to receive the benevolent (charitable) gift tax-free, and in turn the church does not have to issue the recipient a Form 1099-MISC. 

However, in order to fully understand benevolence, we must also understand who qualifies to receive benevolence.

Income Tax Regulation 1.501(c)(3)-1(d)(2) defines those who qualify for benevolence.

“[P]ersons who are financially unable to care for themselves as a result of sudden and severe or overwhelming financial burdens arising from events beyond their control are proper objects of charity because they are considered to be ‘distressed’.” (Emphasis added.)

Additionally, Income Tax Regulation 1.170A-4A(b)(2)(ii)(D) defines "needy" as a “person who lacks the necessities of life, involving physical, mental, or emotional well-being, as a result of poverty or temporary distress.”

In order to fully understand benevolence, you must also understand who qualifies to receive benevolence.

Based off of these two definitions from the IRS, I think it is safe to say that the IRS’ definitions align with what comes to mind when we all think of one who is needy.

Yet, is it possible for someone to meet the IRS’ definitions of a “needy” person and still not qualify for benevolence from your church or ministry?

Who actually qualifies for benevolence from your church or ministry?

This may come as a surprise to you, but not everyone is able to receive benevolence from your church. Let me explain.

Treasury Regulation 53.4958-39(b) details those who are considered “disqualified persons.” In essence, those who have substantial influence in your church, along with their family members, are disqualified from receiving benefits from the organization.

Therefore, board members and their direct family members are ineligible to receive any financial benefits from your church, and this includes benevolence.

When a disqualified person receives benevolence from your church, what occurs is known as an excess benefit transaction. 

An excess benefit transaction takes place when a disqualified person receives any type of financial benefit or assistance that is in excess of the service that person provides to the organization.

According to Internal Revenue Code (IRC) section 4958, disqualified persons may receive compensation in consideration of services rendered. Meaning, they can receive financial compensation that is reasonably based for a service they provide to the church. 

However, other than compensation for services rendered, disqualified persons may not receive financial assistance (benevolence included) from your church due to their position of considerable control and influence within the church.

How to create a benevolence program for your church or ministry

Now that you have a better understanding of benevolence as well as who does and does not qualify for benevolence, I hope you are beginning to see the importance of having a benevolence program in place.

Below are 4 steps that your church or ministry should take when creating a benevolence program:

1. Create a benevolence committee. This committee is responsible for crafting a mission statement and benevolence policy. They also review the needs presented to the church from those in need, and determine the best course of action for meeting those needs through the benevolence fund. This committee is ultimately responsible to the board of directors. If you are unable to create a benevolence committee, then the board of directors will assume all responsibilities.
2. Determine how your church will serve those in need. You need to determine the specific kinds of resources that your benevolence program will offer. When determining the types of resources and assistance that you will offer, you want to keep your mission statement and program goals in mind. 
3. Establish a benevolence policy. It is imperative that you establish a benevolence policy that provides guidance and structure of the procedures in implementing your benevolence program. Every church and ministry that goes through our StartRIGHT® Program receives this type of policy. If you have questions or need assistance with this policy, feel free to give us a call at 877-494-4655.
4. Create a benevolence application/request form. You should require that anyone requesting benevolence from your church or ministry complete a benevolence application/request form. This application/request form will help your benevolence committee (or board of directors) identify and meet the needs of those in your church and in your community.

To further assist you in creating a benevolence program, we have created a more detailed and comprehensive resource for churches and ministries. You can click here for more information.

Is your “house in order?”

Being benevolent is who we are as followers of Christ and as ambassadors of God’s kingdom. Yet, the world in which churches exist and operate today is not as it once was. It is not as easy to simply meet a need and not think twice about it these days.

As a result, it is important for you to become, and remain, a good steward of all that God has entrusted to you. How your church or ministry operates, or does not operate, is a key part of that process.

For many of you reading, it is time for you to get your “house in order.” You have put off the task of becoming compliant far too long. No longer will the mindset of “I’ll get around to it one day” work. 

As a first step in the right direction, I challenge for you and some of your board members to attend one of our Ultimate Church Structure Conferences. By taking this first step you are actively working toward that very goal of getting your house in order.

Handpicked articles for you:

• “The Pastor’s Discretionary Fund”
• “How to Handle Designated Donations Given to Your Ministry”
• “3 Positions Every Church Board Must Fill”

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