Donations – A Ministry’s Responsibility to Control

To be tax-deductible, the charity must exercise full administrative control over donated funds to ensure that they fulfill exempt purposes and programs. 

In 1962, the Internal Revenue Service issued Revenue Ruling 62-113, upholding a donor’s contribution to a church fund out of which missionaries, including the donor’s son, were compensated. The ruling states:

If contributions to the fund are earmarked by the donor for a particular individual, they are treated, in effect, as being gifts to the designated individual and are not deductible. However, a deduction will be allowable where it is established that a gift is intended by a donor for the use of the organization and not as a gift to an individual. The test in each case is whether the organization has full control of the donated funds, and discretion as to their use, so as to insure that they will be used to carry out its functions and purposes. In the instant case, the son’s receipt of reimbursement from the fund is alone insufficient to require holding that this test is not met. Accordingly, unless the taxpayer’s contributions to the fund are distinctly marked by him so that they may be used only for his son or are received by the fund pursuant to a commitment or understanding that they will be so used, they may be deducted by the taxpayer in computing his taxable income.

Other court cases that focused on designated contributions to charitable organizations and the determination of whether the charity exercised sufficient control over the gifts include:
  • Peace v. Commissioner, 43 T.C.1 (9064)
  • Lesslie v. Commissioner, 36 T.C.N. 495 (1977)
  • Winn v. Commissioner, 595 F.2d 1060 (5th Cir. 1979)
  • Ratterman v. Commissioner, 11 T.C. 1140 (1948)
  • Revenue Ruling 78-366
  • White v. Commissioner, 725 F.2d 1269 (CA-10, 1984)
  • Rockefeller v. Commissioner, 676 F.2d 35 (CA-2, 1982)
  • Davis v. Commissioner, 664 F. SUPP. 468 (DC-ID, 1987)
  • Cooke v. Commissioner, 57 TCM 681 (1989)

Also see, Technical Advice Memorandum 9405003.



This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.